DISCLOSURE 2019

JTC Holdings
JTC Holdings, Ltd.

Please be noted this English version is for your reference purposes only;
the original in Japanese prevails if any discrepancies are found.

Management Message
As Japan's No. 1 trust bank group specializing in asset administration,
we shall aim to be the best partner that our clients can rely on.

We would like to express our sincere gratitude for your continued support.
Our Company was established in October 2018 as a financial holding company through a joint
share transfer method by Japan Trustee Services Bank and Trust & Custody Services Bank with theaim of establishing Japan's leading asset administration bank.
Total assets under custody of our Group amounted to approximately ¥700 trillion (of which, trust
assets were approximately ¥400 trillion). As "Japan's No. 1 trust bank group specializing in asset
administration," our officers and employees shall join forces to do our utmost to meet the expectationsof customers and all of our stakeholders.
Diversification and sophistication of investment chains in Japan has accelerated amid the severe
investment environment in recent years, and asset administration institutions that support thesechains are required to demonstrate their expertise in a wide range of business areas, improve thequality of administration work, and strengthen system response capabilities more than ever.
Under the circumstances, our Group will leverage the management resources and know-how of ourbanks to develop human resources specializing in asset administration, strengthen systemdevelopment capabilities, and ensure stable, high-quality operations to meet the diverse needs ofcustomers.
All officers and employees will continue to make every effort with a sense of ownership and integrity,
giving the highest priority to the voice of customers. We look forward to your continued support.
President & CEO

Nobumitsu Watanabe

Deputy President

Yoshikazu Tanaka

JTC Group

Custody Bank ofJapan, Ltd.

JTC Holdings, Ltd.

Japan Trustee
Services Bank

Trust & Custody
Services Bank

Merger of
Three
Companies

Abbreviation: CBJ

Our Group aims to establish "Custody Bank of Japan, Ltd." through the merger of 3 companies by
2021.
The name of a new company has been kept simple for our clients and easy to recognize in the
global markets as a leading Japanese bank specialized in asset administration, broadly engaged infiduciary and custody businesses, including comprehensive outsourcing services for life insurancecompanies.

CONTENTS

JTC Holdings

2■ Corporate Philosophy, Vision and Action Guidelines■ Corporate Data
Group Company Profile, Corporate Officers, Organization Chart, and History■ Review of Business Performance■ Fiduciary Duty
■ Corporate Governance■ Risk Management■ Compliance■ Internal Audit■ Consolidated Financial Data
■ Basel III: Pillar 3

Japan Trustee Services Bank

35

Trust & Custody Services Bank

95

1

Corporate Philosophy, Vision and Action Guidelines of JTC Group

Corporate Philosophy
As Japan's No. 1 trust bank group specializing in asset
administration, we shall contribute to the sounddevelopment of economy and society by playing a rolein the development of asset management businesses
and the asset formation of the people of Japan.

Vision● We respond to the trust of society as a financial
infrastructure by providing high-quality and reliable
services● We aim to become the best partner for our customers bymeeting their diverse needs and managing the changing
environment● We shall always be the company that takes pride in being
an asset administration professional in which employees
work to their full potentials

Action Guidelines● Acknowledging our social responsibility, we shall act with a sense of ownership andintegrity● We shall place our customers first and provide high-quality services that satisfy them
● In compliance with laws, rules and social norms, we shall be sincere and fair in our
conduct● We shall respect and trust each other and create an open and active work
environment● We shall tirelessly improve ourselves to acquire advanced expertise and skills

2

Corporate Data (As of July 1, 2019)

Group Company Profile
JTC Holdings, Ltd.
Head Office:Harumi Island Triton Square Tower Y, 8-11, Harumi 1-chome, Chuo-ku, Tokyo

Establishment:

October 1, 2018

Representative:

Nobumitsu Watanabe, President & CEO

Capital:¥500 million

No. of shares issued:
Shareholders:

2,040,000 shares

Sumitomo Mitsui Trust Holdings, Inc.

680,000 shares (33.3%)

Mizuho Financial Group, Inc.

550,800 shares (27.0%)

Resona Bank, Limited

340,000 shares (16.7%)

The Dai-ichi Life Insurance Company, Limited

163,200 shares (8.0%)

Asahi Mutual Life Insurance Company

102,000 shares (5.0%)

Meiji Yasuda Life Insurance Company

91,800 shares (4.5%)

Japan Post Insurance Co., Ltd.

71,400 shares (3.5%)

Fukoku Mutual Life Insurance Company

40,800 shares (2.0%)

No. of employees:

50 (As of March 31, 2019)

URL:

https://www.jtc-hd.jp/

Lines of Business
The purpose of a bank holding company shall be to conduct the following businesses:(i) Business management of the bank holding company group to which the company affiliates and the businessincidental thereto;(ii) Other businesses the bank holding company may engage in pursuant to the Banking Act.

Japan Trustee Services Bank, Ltd.
Head Office:Harumi Island Triton Square Tower Y, 8-

Trust & Custody Services Bank, Ltd.
Head Office:11, Harumi 1-chome, Chuo-ku, Tokyo

Harumi Island Triton Square Tower Y, 812, Harumi 1-chome, Chuo-ku, Tokyo

Establishment:

June 20, 2000

Establishment:

January 22, 2001

Representative:

Yoshikazu Tanaka, Director andRepresentative:

Nobumitsu Watanabe, President &President
Capital:CEO¥51.0 billion

Capital:¥50 billion

No. of shares issued: 1,020,000 shares

No. of shares issued: 1,000,000 shares

Shareholders:

JTC Holdings, Ltd. (100%)

Shareholders:

JTC Holdings, Ltd. (100%)

No. of employees:

1,067 (As of March 31, 2019)

No. of employees:

697 (As of March 31, 2019)

URL:

https://www.japantrustee.co.jp/

URL:

http://www.tcsb.co.jp/

Lines of BusinessLines of Business

Securities administration business, trust and banking

Securities administration business, trust and banking

businesses pertaining to asset administration,businesses pertaining to asset administration,business related to Japanese Master Trust

business related to Japanese Master Trust

Long-term rating

Long-term rating

Japan Credit Rating Agency, Ltd. (JCR)

AA+

Rating and Investment Information, Inc. (R&I)

AA-

Moody’s

A1

Moody’s

A1Standard & Poor’s Financial Services LLC

A-Standard & Poor’s Financial Services LLC

A-

3

Corporate Officers
JTC Holdings
Chairman

Hiroki Tanaka

Director

Yasuo Mizota

President & CEO

Nobumitsu Watanabe

Full-time Corporate
Auditor

Isao Kondo

Deputy President

Yoshikazu Tanaka

Full-time Corporate
AuditorNoboru Senni

Director

Hiroshi Takahashi

Corporate Auditor

Kiyomitsu Asahi

Director

Hiroyuki Obata

Corporate Auditor

Takakazu Wada

Director

Masatoshi Noguchi

Corporate Auditor

Yasuhiro Otsuka

Director

Akira Noguchi
Munetaka Saito

Corporate Auditor

Hideki Matsuoka

Full-time Corporate
AuditorCorporate Auditor

Yasutada Yatsuda

Masatoshi Noguchi

Executive Officer

Naoyuki Ohashi

Masato Tanabe
Yuji Takei
Takahiro Ishi

Executive Officer

Satoshi Sato
Masaaki Tagawa
Masao Maeda

Hiroki Tanaka
Full-time Corporate Auditor Tatsuya Tsuboi

Executive Officer

Director

Japan Trustee Services Bank
Representative Director
and President
Representative Director
and Deputy President
Representative Director
and Deputy PresidentManaging Director
Managing Director
Managing Director

Yoshikazu Tanaka
Hiroshi Takahashi

Director

Executive Officer
Executive Officer

Executive Officer

Yoshihide Haze

Yasushi Kasahara
Toshiyuki Hioki

Trust & Custody Services Bank
President & CEO

Nobumitsu Watanabe
Akira Noguchi

Director

Senior Managing Director

Hiroyuki Obata

Full-time Corporate
Auditor

Hiroto Uchino

Managing Director

Yasushi Makino
Hiroki Tanaka
Masao Kanamaru

Corporate Auditor

Masato Monguchi
Takehiko Watabe
Masafumi Yoshida

Director

Goji Fujishiro

Managing Executive
Officer

Minoru Mochizuki

Director

Yukihiro Fujioka
Tomohiro Nishio

Executive Officer

Kenji Yoshikawa
Taku Murakawa

Deputy President

Director
Director

Director

4

Full-time Corporate
AuditorCorporate Auditor
Managing Executive
Officer

Executive Officer

Shigeaki Asai
Makoto Saito

Organization Chart
General Meeting of
Shareholders

Audit & Supervisory Board
and Corporate Auditors

Board of Directors

Consolidation Designing
Department

Systems Management
Department

System Risk Management
Department

Compliance Department

Risk Management
Department

Human Resource
Department

Corporate Administration
Department

Corporate Planning
Department

Internal Audit
Department

Operations Management
Department

Management
Committee

President & CEO

History
Trust & Custody Services BankJapan Trustee Services Bank

■ June 2000
Establishment of Japan Trustee Services Bank
Investors: Daiwa Bank (now Resona Bank)
Sumitomo Trust and Banking (nowSumitomo Mitsui Trust Bank)■ September 2002
Capital participation by Mitsui Trust Holdings (Currently
Sumitomo Mitsui Trust Holdings)■ January 2001
Establishment of Trust & Custody Services Bank
Investors: Mizuho Trust & Banking
The Dai-ichi Life Insurance
Asahi Mutual Life Insurance
Yasuda Life Insurance (Currently Meiji
Yasuda Life Insurance)
Fukoku Mutual Life Insurance■ March 2003
Capital participation by Mizuho Financial Group■ October 2016
Capital participation by Japan Post Insurance■ March 2018
Japan Trustee Services Bank and Trust &Custody Services Bank signed an agreementon business merger■ October 2018
Establishment of JTC Holdings

JTC Holdings, Ltd.

5

Review of Business Performance● Review of Performance and Results
Our Company was established in October 2018 as a financial holding company with Japan Trustee Services
Bank and Trust & Custody Services Bank as our subsidiaries.
Upholding Corporate Philosophy and Vision of our Group, we have formulated Corporate Action Guidelines forofficers and employees to realize them. Based on our Corporate Philosophy, we, as a financial holding company,
monitor the progress of management plans of subsidiaries and provide appropriate supervision and guidance
regarding applications and reports from subsidiaries.
In addition, in order to fulfill our fiduciary duty under our Group Vision to “Become the best partner for ourcustomers by meeting their diverse needs and managing the changing environment," we have formulated andannounced the Group Management Policy and Asset administration Action Policy, and our subsidiaries haveformulated and announced their action plans accordingly.
While managing our business as described above, we have been working on various measures such as
formulating the Bank Merger Plan, making a steady progress towards the establishment of “Custody Bank ofJapan” through the merger of the 3 companies.

● Income Summary
Our Group's consolidated results for the year under review were as follows.
The consolidated financial statements for the fiscal year under review shall cover a consolidated accounting
period from April 1, 2018 to March 31, 2019 as Japan Trustee Services Bank was set as an acquiring company
under the Accounting Standard for Business Combination, and thereby the operating results shall consolidate thebusiness results of Japan Trustee Services Bank from April 1, 2018 to March 31, 2019, and those of our Company
and Trust & Custody Services Bank from October 1, 2018 to March 31, 2019.
Consolidated ordinary revenues were ¥41,792 million and consolidated ordinary expenses were ¥40,807 million.
As a result, consolidated ordinary income was ¥984 million and the net income attributable to owners of parent
was ¥657 million.
Consolidated total assets were ¥17,534,938 million and consolidated net assets were ¥118,481 million.

● Issues to be Addressed
While completing the safe and steady integration of banks in line with the Bank Merger Plan, we will strengthen
our efforts to improve service quality and productivity, and develop expert human resources to meet the diverse
needs of our customers.

6

Fiduciary Duty*
In order to fulfill our fiduciary duty under the overarching Group Vision to "Become the best partner for ourcustomers by meeting their diverse needs and managing the changing environment," we have formulated andannounced the Group Management Policy and Asset administration Action Policy to practice measures that place
our customers first in fulfilling the Fiduciary Duty of overall asset administration business.
* It is a collective term for a broad range of diverse roles and responsibilities assumed by persons performing
certain tasks in order to meet the confidence of others
Group Management Policy
Our Group shall establish and comply with the Group Management Policy in carrying out asset administration
businesses that meet the diverse needs of our customers.
1. Management System
Concrete action plans shall be formulated and announced by the holding company and each Group company
for implementation, and the compliance division periodically reports on the status of compliance to the Boardof Directors and other organizations.
2. Performance Evaluation
An appropriate performance evaluation system shall be developed to evaluate initiatives that truly meet theneeds and realize the benefits of customers.
3. Management of Conflict of Interest
Conflict of interest shall be appropriately managed by the holding company and each Group company byidentifying and classifying transactions that may cause a conflict of interest and determining specificmanagement methods. We will also enhance the management on conflict of interest within the Group by
providing easy-to-understand information on the examples of conflict of interest.
4. Penetration of Corporate Culture
We will establish a corporate culture in which all officers and employees share awareness of and practicecompliance with the fiduciary duty by establishing training and other appropriate motivation frameworks.

Asset administration Action Policy
Our Group shall establish and implement the following asset administration policies.
1. Strengthening Asset administration Service Framework• We shall appropriately allocate resources such as human resources, administrative infrastructures, andsystems in order to improve reliability and speed of administrative work as a basis of asset administration
services.
• We shall strive to develop human resources equipped with high-level expertise in legal and tax systems
related to securities and fund settlement necessary for asset administration services.
2. Sophistication of Administration, Systems, etc. as Financial Infrastructures• To meet the increasingly diverse and sophisticated asset management needs of our clients on a global
scale, we shall promote advancement of administration and systems.
3. Initiatives on Improvement of Service Quality and Development of New Services• While appropriately managing trust assets for assurance of clients, we shall constantly strive to develop
new services in a wide range of fields in the asset administration, with the aim of providing optimal solutions
to meet clients’ increasingly diverse and sophisticated needs.
4. Enhancement of Information Service to Support Customers' Investment Activities• In order to contribute to the sophistication of our customers' investment activities, we shall strive to provide
high value-added information (legislation, taxation, and market information) in a timely manner, based on
various reports as well as market information.

7

Corporate Governance
As a holding company, our Company is committed to building a corporate governance system led by the Boardof Directors and enhancing the corporate governance functions in order to fulfill our social mission by conducting
management that respects the views of shareholders and other stakeholders, and by contributing to the asset
management business development and the sound economic and societal development through the realization ofsustainable and stable corporate values.

● Outline of Corporate Governance Structure
1. Functions of Business Execution and Supervision(1) Directors and Board of Directors
The Board of Directors is composed of 9 directors (including 3 external directors) and meets once a monthin principle. The Board of Directors can also meet on an irregular basis to make decisions on importantmatters such as management policies and strategies. Furthermore, the Board of Directors is responsible foroverseeing the execution of duties by directors, including receiving reports on the progress of businessexecution by our Company and the subsidiaries and other important matters.
(2) Management Committee
Management Committee, consisting of executive directors, is established under the Board of Directors, andmeets twice a month in principle and as needed. Management Committee determines important mattersrelated to the execution of business at our Company and the subsidiaries and receives reports on otherimportant matters.
(3) Group business management
Applications and reporting matters received from our subsidiaries are discussed and approved by theManagement Committee and the Board of Directors, and guidance and advice are provided as necessary,in accordance with the Regulations for Business Management of Subsidiaries and the Business
Management Agreement.
2. Functions of Audit(1) Corporate Auditors and Audit & Supervisory Board
Audit & Supervisory Board consists of 2 full-time corporate auditors and 4 part-time corporate auditors (whoare external corporate auditors). Audit & Supervisory Board ensures effective auditing functions for
Directors' decision-making and business execution, and works to strengthen the auditing management
system. In accordance with Audit Policy and Plan determined by the Audit & Supervisory Board, each
Corporate Auditor shall audit Directors' performance of duties, internal controls, and other matters byattending meetings of the Board of Directors and other important meetings, inspecting material resolution
documents, auditing each department of the Company, and investigating subsidiaries. Corporate Auditors
and Audit & Supervisory Board shall work closely with the internal audit division and the independent audit
firm, and strive to conduct effective audits by exchanging opinions on important auditing matters throughregular meetings with the Representative Director and others.
(2) Internal Audit
Internal Audit Department, which is independent of other departments within our Group, conducts internal
audits based on the "Basic Internal Audit Plan" approved by the Board of Directors. Audit results arereported to the Board of Directors on a regular basis.
(3) Auditors’ Statement
KPMG AZSA LLC conducts accounting audits as our Group's independent audit firm.

8[Corporate Governance Structure]

Directors/Board of
Directors
Supervision

Independent Audit Firm

Reports

Audit

Corporate Auditors/Audit &Supervisory Board

Audit

Collaboration<JTC Holdings>

Selection

Selection

Selection

General Meeting of Shareholders

Representative Director

Audit

Audit

Internal Audit

Approvalandinstruction

Requestand report

Business Execution Division

Businessmanagement

Requestand report

Approvalandinstruction<Subsidiaries>

Audit

Japan Trustee Services Bank

Trust & Custody Services Bank

9

Risk Management● Risk Management Systems
For our Group to fulfill its public mission as a trust bank group specializing in asset administration, it is required
to ensure the soundness of its management by measuring risk accurately and controlling it. To satisfy therequirement, the Company categorizes the business risks by factor into “credit risk”, “market risk”, “liquidity risk”
and “operational risk”, manages them according to each risk characteristic, and develops a management system
for integrated management of those risks.
● Basic Concept
Under the "Basic Risk Management Policy" established by the Board of Directors for the Group-wide risk
management, our Company manages risks according to their characteristics. In other words, each risk
category is assigned to the department, and these risk categories are managed through a process of risk
management activities, involving identification, assessment, monitoring, control, and mitigation of risks togain an accurate understanding of the status of such risks and take appropriate risk measures. In addition,
integrated risk management is focused by gaining holistic understanding of risks, making qualitative andquantitative assessments, and comparing and contrasting with our Group’s business capabilities.
Our Group is aware that the principal risk in its risk profile is operational risk because of its specialization in
the asset administration business and, therefore, focuses on the reduction of operational risk. For other risk
categories, our policy is to minimize such risks that may arise in the conduct of its asset administration
business operations.
[Group Risk Management System and our Corporate Organizational Structure]

JTC Holdings
Statement of Basic Policy
Guidance and recommendations
on risk management

Application and reporting of risk
management status<Subsidiaries>
Japan Trustee Services Bank

Trust & Custody Services Bank

[Structure of JTC Holdings]

Risk Management
Department

System Risk
Management
Department

Reputational risk

Tangible asset risk

Personnel risk

Legal &
compliance risk

Information
security risk

System risk

Administractive risk

Liquidity risk

Market risk

Credit risk

Operational risk

ComplianceDepartment

Risk Management Department

110[Major Risk Categories of Our Company]
Risk category

Content of risk

Credit risk

Risk of incurring losses due to a decline in or complete loss of asset value (including off-balance) asa result of a deterioration in the financial condition of borrowers.

Market risk

Risk of incurring losses due to fluctuations in the value of assets/liabilities (including off-balance), orin the revenues generated from assets/liabilities, caused by fluctuations in various market risk factors,
such as interest rates, foreign exchange rates, and stocks. This includes the risk (market liquidityrisk) of incurring losses due to market turmoil that prevents transactions from being carried out in themarket or forces transactions to be carried out at prices significantly more disadvantageous thanusual.

Liquidity risk

Risk of incurring losses due to difficulty in securing the needed funds caused by a mismatch between
operation and financing periods and unexpected outflow of funds, or the case where obligors areforced to procure funds at interest rates that are much higher than normal.

Operational risk

Risk of incurring losses resulting from inappropriate business processes, activities by officers andemployees, etc. and systems, or from external events.

● Operational risk management
Our Group stipulates in its "Risk Management Rules" that for each of the following operational risks (risksubcategory), each risk management department shall implement its own risk management activities, and the
Risk Management Department, as a comprehensive operational risk management unit, shall establish amanagement system for planning, promoting and coordinating all aspects of operational risk management, forthe following risk subcategories that constitute operational risks.
• The Risk Management Department is responsible for administrative risks to plan and promote initiatives toenhance administration management structure, improve processing quality, and increase compliance withadministration procedures.
• The System Risk Management Department is responsible for system risks to plan and promote stable
operation of IT systems.
• Of information security risks, the Risk Management Department is responsible for information management,
and the System Risk Management Department is responsible for information systems, to plan and promotevarious risk management.
• The Compliance Department is responsible for legal and compliance risks to plan and promote various
types of legal and compliance risk management.
• The Risk Management Department is responsible for personnel risks to plan and promote various types of
personnel risk management.
• The Risk Management Department is responsible for tangible asset risks to plan and promote various typesof tangible asset risk management.
• The Risk Management Department is responsible for reputation risks to plan and promote various types of
reputation risk management.

● Information Management System
Our Group has structured and audited its information security systems on a systematic basis and has createdthe necessary systems for risk management. Today’s asset administration business is based on sophisticatedcomputerized information processing, and requirements for the strict management of information, as represented
by the provisions of Japan’s Personal Information Protection Law, have been tightened substantially.
Our Group adjusts the importance placed on all information assets held according to the level of risks of leakage,loss, or alteration that may cause our Group and customers to incur a loss. Methods of acquisition, use,management, storage, internal communications, removal of assets from the Company, and disposal of information
are determined according to the level of importance to ensure proper information management.

11Compliance● Compliance Systems
As Japan's No. 1 trust bank group specializing in asset administration, we shall contribute to the sounddevelopment of economy and society by playing a role in the development of asset administration business andthe asset formation of the nation. Our Group has adopted this Corporate Philosophy. In order to realize our
Corporate Philosophy, we act with integrity and impartiality in compliance with laws, rules, and social norms as apillar of our Action Guidelines. For this reason, our Group positions legal and other kinds of compliance as one of
our top priority management issues, in other words, compliance with not only laws and regulations, but also social
norms in a broad context. Our Company, by developing compliance management system in overall operation of
our Group, strives to ensure sound and appropriate management based on self-discipline, and ensure ourcustomers and society have full confidence in us.
● JTC Holdings’ Compliance Structure
The Board of Directors makes decisions on basic compliance matters and oversees the implementation.
The President also oversees compliance at our Company, and the Management Committee deliberates andreports on compliance matters.
Our Company has designated the Compliance Department as a department supervising compliance matters.
The department develops internal regulations required for the compliance management system, implements
measures and guidance, responds to issues, and improves training and education structures to manage
overall compliance in our Group. The Compliance Department regularly reports progress on compliancematters to the Board of Directors, etc. and promptly reports when a serious violation of laws and regulations oran event with a grave impact on management occurs.
In each department of our Company, the Compliance Head, a post assumed by the general manager, andthe Compliance Manager are assigned to secure the effectiveness of compliance in each department andcarry out concrete measures in cooperation with the Compliance Department.
[Compliance Structure]<JTC Holdings>
Board of Directors

Management Committee

Management,
advice andguidance

Compliance Department

General managers and compliancemanagers

Submission
and report<Subsidiaries>
Japan Trustee Services Bank
Trust & Custody Services Bank

● Making All Personnel Aware of Compliance
In principle every year, the Compliance Department formulates a compliance program, and it is a specific action
plan for the achievement of compliance. This compliance program is disseminated across the entire organization
together with the compliance programs of our subsidiaries, after obtaining approval of the Board of Directors. Our
Group has also established the Compliance Manual as a practical guide for officers and employees to ensurecompliance in each company. Formulation and important revision of the Compliance Manual are disseminatedacross the organization of each company after approval of the Board of Directors is obtained.
● Compliance Hotline System
Internal and external reporting desks (the Compliance Hotline) are established for officers and employees,
etc. of our Group to report acts of legal violations, or suspected violations within our Group. When a report isreceived, the Compliance Department reports to the officer(Director) in charge of the Compliance Department
and Corporate Auditors and takes appropriate action.

1
12

Internal Audit● Basic Action Policy
Our Group's internal audit is a process, independent from the business lines, of verifying the appropriatenessand effectiveness of governance, risk management and controls that are carried out to help an organizationachieve its goals, objectively and holistically assessing the results, providing findings and recommendations tocorrect issues, and following up on the status of improvements.
Our Company has established the Basic Policy on Internal Audit to ensure sound business in our Group, andcarries out the following initiatives to verify and assess the appropriateness and effectiveness of the internal
control management system.
(i) Establishment of the internal audit division that is independent from the business execution divisions andhas a sufficient check-and-balance function(ii) Based on the formulation of our Group's internal audit plan, the internal audit division audits each businessexecution division and the subsidiaries as necessary and provides findings and recommendations for
improvements.
(iii) Results of internal audits and the progress of internal audit plans are reported to the Board of Directors inaccordance with internal audit rules.
● Organizational structure
Our Group has established the Internal Audit Department that is independent of the business execution
divisions. The Internal Audit Department of our Company also conducts internal audits on the subsidiaries asneeded, either directly or in cooperation with the Internal Audit Department of our subsidiaries, covering theentire Group's internal audits.
● Functions and roles
In line with the Basic Policy on Internal Audit, the Internal Audit Department formulates an internal audit plan
focused on material risk items that are common among our Company and the subsidiaries. The plan isapproved by the Board of Directors.
Results of internal audits are reported to the President and Corporate Auditors without delay and, together
with results of internal audits of our subsidiaries, are periodically reported to the Management Committee andthe Board of Directors.
By receiving applications for internal audit plans from the subsidiaries and reports on results of internal
audits, the Internal Audit Department has centralized understanding and management on implementation ofinternal audit operations at our subsidiaries, verifying appropriateness of the internal audit system, methods,
depth, etc., and appropriateness and effectiveness of internal control management system of our subsidiaries,
and providing advice, guidance, and recommendations for improvement as necessary.
[Internal Audit Structure]<JTC Holdings>
Board of Directors

Placing plans on
the agenda,
reporting on results

AuditorReports

Management Committee

Placing plans on theagenda, reporting on
results

Internal Audit Department
Business Execution DivisionInternal Audit

Application, reporting, etc.

Advice, guidance andrecommendations for improvement<Subsidiaries>
Japan Trustee Services Bank and Trust & Custody Services Bank

13

Consolidated Financial Data

Changes in key management indicators(¥ million)

FY2018
Ordinary income
41,792
Ordinary profit
984
Net income attributable to owners of parent
657
Comprehensive income
696
Net assets
118,481
Total assets
17,534,938
Consolidated Capital Adequacy Ratio (Domestic standard) (Note 2)
37.21%
Notes: 1.
As our Company was established on October 1, 2018, changes in key management indicators andothers are not shown for FY2017 or before.
2. Based on Article 52-25 of the Banking Act, the “Consolidated Capital Adequacy Ratio (Domestic
standard)” is calculated according to “the standards for a bank holding company to judge on
appropriateness of the capital adequacy in light of assets held by the bank holding company and its
subsidiaries” (Financial Services Agency Public Notice No. 20 of 2006).

As our Company was established on October 1, 2018, figures for FY2017 are not shown.

Consolidated Balance Sheets(¥ million)

FY2018(March 31, 2019)

AssetsCash and due from banks
Call loans and bills bought
Receivables under resale agreements
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Buildings
Lease assets
Other tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Net defined benefit asset
Deferred tax assets
Total assets
Liabilities
Deposits
Call money and bills soldBorrowed money from trust account
Other liabilities
Provision for bonuses
Net defined benefit liability
Provision for directors’ retirement benefits
Total liabilities
Net Assets
Capital stock
Capital surplus
Retained earnings
Total shareholders’ equity
Valuation difference on available- for-sale securities
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

16,030,507
60,00031,155
295,642
877,192
603
195,178
3,280
1,964
1
1,313
40,49240,44942233
651
17,534,938
7,583,969
759,025
9,008,305
63,709541
861
43
17,416,456
500
109,551
8,390
118,442117
 77
39
118,481
17,534,938

1
14

Consolidated Statements of Income(¥ million)

FY2018(from April 1, 2018
to March 31, 2019)

Ordinary income

41,792Trust fees

28,114

Interest income

 3,795

Interest on loans

 150Interest and dividends on securities 21Interest on call loans and bills boughtInterest on receivables under resale agreements
Interest on receivables under securities borrowing transactions
Interest on due from banks
Other interest received
Fees and commissions
Other income
Other income
Ordinary expenses
Interest expenses
Interest on deposits
Interest on call money and bills soldInterest on borrowings

1
 17
0
 3,616
7
17,39775
75
40,807
 95
7
 149
0

Other interest expenses

46

Fees and commissions expenses

2,319

Other operating expenses
General and administrative expenses
Other expenses
Other expenses

1
38,55625
25

Ordinary profit

984

Extraordinary income

17

Gain on bargain purchase
Extraordinary loss
Loss on disposal of fixed assets

17
46
46

Income before income taxes

955

Income taxes—current

332

Income taxes—deferred 34

Total income taxes

298

Net income

657

Net income attributable to non-controlling interests
Net income attributable to owners of parent

657

15

Consolidated Financial Data

Consolidated Statements of Changes in Net Assets(¥ million)

FY2018 (from April 1, 2018 to March 31, 2019)
Shareholders’ equity

Capitalstock

Balance at the
beginning of theperiod51,000

Accumulated other comprehensive income

Valuation
Total
Total
difference
Total
Remeasurements accumulated
net
Capital Retainedonshareholders’of defined benefit
other
assetssurplus earnings
availableequity
plans
comprehensive
for-saleincomesecurities
-

8,435

59,4350- 0 59,435

Changes during theperiodFluctuation due tostock transfer

 109,551
50,50059,05159,051

Cash dividends

 702

 702

 702

Net income
attributable toowners of parent

657

657

657

Net changes of
items other thanshareholders’equity

117

 77

39

39

Total changes during
the period

 109,551
50,500 45

59,006117

 77

39 59,045

Balance at the endof the period

500 109,551

8,390

118,442117

 77

39 118,481

1
16

Notes to Accounting Items (FY2018)
Amounts less than ¥1 million are rounded down.
Definitions of subsidiaries, affiliates and other corporations shall be based on Paragraph 8, Article 2 of the Banking Act and Article 4-2 of the Order for Enforcement of
the Banking Act.

Policy for preparation of the consolidated financial statements(1) Matters related to the scope of consolidation(i) Subsidiaries, etc. to be consolidated: 2 companies
Company NameJapan Trustee Services Bank, Ltd.
Trust & Custody Services Bank, Ltd.
(ii) Non-consolidated subsidiaries, etc.
None(2) Matters related to the application of equity method(i) Non-consolidated subsidiaries, affiliates, and other corporations applying equity methodNone(ii) Non-consolidated subsidiaries, affiliates, and other corporations not applying equity method
None(3) Matters related to business years of subsidiaries, etc. to be consolidated
The account closing date of consolidated subsidiaries, etc. shall be as follows.
As of March 31: 2 companies

Matters related to accounting policies(1) Standards for evaluation of securities and valuation methods used
In principle, as with available-for-sale securities, securities are valued by the market value method based on the market price or other appropriate price at
the consolidated balance sheet date (with the sales price calculated by the moving average method). Provided, however, that regarding securities for which it
is extremely difficult to determine their fair value, the original purchase prices are employed based on the moving average method. Note that the full amount ofadjustments in the value of available-for-sale securities is accounted for by adding such amounts directly to net assets.
(2) Evaluation standards and methods for derivative transactions
Evaluation of derivative transactions shall use the market value method.
(3) Depreciation methods(i) Tangible fixed assets (excluding leases)
Depreciation of tangible fixed assets is calculated by the declining-balance method, with the exception of buildings (excluding equipment installed inbuildings), and facilities attached to buildings and structures acquired on or after April 1, 2016, which are depreciated by the straight-line method.
Estimated useful lives of major items are as follows:
Buildings: 3–50 years
Others:2–20 years(ii) Intangible fixed assets (excluding leases)
Intangible assets are amortized by the straight-line method. Software for internal use is amortized over its estimated useful life (mainly 5 years).
(iii) Lease assets
Lease assets for which the ownership does not transfer and are included in tangible fixed assets are depreciated using the straight-line method over theestimated useful life. Note that for those leases that are based on contracts providing for guarantees of residual value the assets are depreciated down to thespecified residual value, and all other assets are depreciated to zero.
(4) Basis for recording provision for bonuses
To provide for the payment of bonuses, provisions for employees’ bonuses are set aside in the amount of the estimated bonuses attributable to theconsolidated fiscal year under review.
(5) Basis for recording provision for directors’ retirement benefits
To provide for the payment of retirement benefits for directors, of the estimated payment of such retirement benefits, a portion of the total of such benefits thathave accrued up to the end of the consolidated fiscal year under review is set aside as a reserve.
(6) Accounting method related to retirement benefits
In calculating retirement benefit liabilities, the expected amount of retirement benefit payments through the end of the consolidated fiscal year under review isallocated to the fiscal year under the benefit formula standard. In addition, the method for amortizing expenses or recognizing gains arising due to actuarial
differences shall be as follows.
Actuarial calculation differences: The unrecognized net actuarial difference accrued in each consolidated fiscal year is amortized proportionately using thestraight-line method over a specified number of years (5 years), which is within the average remaining years of service ineach year when the obligations are incurred, commencing from the next consolidated fiscal year of incurrence
To calculate retirement benefit liability and expenses, some consolidated subsidiaries are subject to a simplified method that uses the accrued year-end
retirement benefits due to personal reasons for retirement benefit liability.
(7) Standards for translating foreign currency assets and liabilities into yen
Foreign currency assets and liabilities are translated into Japanese yen at the exchange rate prevailing at the consolidated balance sheet date.
(8) Accounting for consumption taxes
National and regional consumption taxes are accounted for using the net-of-tax method.

Notes to Accounting Items(Consolidated Balance Sheets)
1. Of the securities received under resale agreements, there are securities that can be freely disposed of using the methods of sale or re-collateralization. Securities
that are pledged to re-collateralization amounted to ¥31,092 million.
2. All amounts of loans are made to the Government of Japan or government-related agencies.
3. Assets pledged as collateral are as follows.
Assets pledged as collateral
Loans and bills discounted: ¥370,462 million
Liabilities corresponding to collateralized assets
The above is collateral for overdraft transactions with the Bank of Japan, and there is no outstanding balance of corresponding liabilities as of the end of
consolidated fiscal year under review.

17Consolidated Financial Data

In addition to the above, collateral for exchange settlement and other transactions has been pledged with securities amounting to ¥1,301 million. Other assets
include margin deposits received from Central Counterparty Clearing Houses (CCPs) of ¥112,597 million, guarantee deposits received from Central Counterparty
Clearing Houses (CCPs) of ¥60,538 million and guarantee deposits and others of ¥9,069 million.
4. Overdraft contracts provide for making loans up to a specified limit, provided there are not violations of the provision of contracts, when loan requests are received
from customers. The unexercised balance of loan commitments under these contracts was ¥2,342,200 million, with the full amount being under a contract term of 1
year or less. Note that, since many of these contracts terminate without requests for overdrafts, the unexercised balance of loan commitments under these contracts
will not necessarily have an influence on the future cash flow. Many of these contracts contain clauses that make it possible to refuse the loan or reduce themaximum amount under the agreement if there are changes in financial conditions, protection of loans or other reasonable grou nds. In addition, collateral such asreal estate and securities are required at the time of contract as needed. After the contract, the business conditions of customers are periodically monitored basedon predetermined internal procedures, and contracts are reviewed and credit protection measures are taken as needed.
5. Accumulated depreciation of tangible fixed assets: ¥6,001 million
6. The principal amount of money trusts with contracts indemnifying the principal amounts entrusted by some consolidated subsidiaries was ¥508,741 million.

(Statements of Income)The negative figure for interest on due from banks, which is included in the interest income, is due to the interest on due from the Bank of Japan becoming negativein net amount accompanying the application of negative interest rates to Bank of Japan current deposits. The negative figures for interest on loans, interest on
receivables under resale agreements, which are included in the interest income, interest on call money and bills sold, which is included in the interest expenses, aredue to the interest becoming negative in net amount accompanying the execution of negative transactions. The negative figures for interest and dividends on
securities, which are included in interest income, are due to the acquisition price of securities exceeding the redemption price.

(Consolidated Statements of Changes in Net Assets)
1. Matters related to class and total number of shares issued and the class and number of treasury stock(Thousand shares)

Total no. of shares at the
beginning of theconsolidated fiscal year
under review

Increase in total no. ofshares during theconsolidated fiscal year
under review

Decrease in total no. ofshares during theconsolidated fiscal year
under review

Total no. of shares at theend of the consolidated
fiscal year under review

1,020

1,020

-

2,040

-

-

-

1,000

Shares issued
Common stock
Treasury stock
Common stock

Remarks

2. Matters related to Dividends(1) Dividends paid during the consolidated fiscal year under review
As our Company is a holding company established through a joint share transfer on October 1, 2018, the amount of cash dividends paid is determined byresolution at the following wholly owned subsidiaries.
Date of decision
Type of shares
Total dividends
Dividends per share
Record date
Effective date
Taken on June 29, 2018
Common stock of Japan
based on Article 319-1
Trustee Services Bankof the Companies Act
Taken on September
27, 2018 based on
Article 319-1 of theCompanies Act

Common stock of Japan
Trustee Services Bank

¥193 million¥190

March 31, 2018

June 29, 2018¥508 million

¥499

-

September 28, 2018

(2) Of dividends with a record date that falls in the consolidated fiscal year under review, there is no dividend whose effective date falls on or after the last day of theconsolidated fiscal year under review.

(Financial Instruments)
1. Matters related to the status of financial instruments(1) Policy on financial instruments
In our Group, each subsidiary, Japan Trustee Services Bank or Trust & Custody Services Bank, operates their businesses under our Company (a bankholding company) focusing on the asset administration business with limited risk taking.
To carry out these businesses, each Group company’s financing team raises funds mainly through liquid deposit and borrowed money from trust account,which borrows surplus funds that are constantly generated by trust accounts. On the other hand, the fund management team invests in Japanese Government
Bonds (JGBs), loans to the Japanese government, etc. to secure collateral for deposits into the settlement system for the smooth execution of settlement
operations.
Each Group company specifies its policies and measures for financing and investment of such financial assets and liabilities in their annual plans. Regarding
risks associated with financial assets and liabilities in our Group as a whole, our Company provides advice and guidance as necessary based on reports fromsubsidiaries.
(2) Types of contents and risks associated with financial instruments
In addition to the deposits with the Bank of Japan, etc., financial assets held by our Group companies are loans to the Japanese government, etc., securities
held as pledge of collateral for the settlement, receivables under resale agreements, call loans, etc. These financial assets are exposed to the risks of a decline
in or loss of the financial asset values (credit risk) due to a deterioration in the financial condition of borrowers and issuers, as well as the risks of a declining
asset value due to fluctuations in financial conditions (market risk). However, by paring them to the essentials, these credit and market risks are mitigated.
Financial liabilities are mainly financed by borrowed money from trust account and deposits. These funding methods involve the risk of incurring losses(liquidity risk) due to funding difficulties resulting from an inability to secure the necessary funds due to a deterioration in financial conditions, etc. or being forced
to raise funds at interest rates significantly higher than usual. However, by limiting our funding methods to highly liquid financial assets, liquidity risks are avoided.
(3) Risk management relating to financial instruments
Under the "Basic Risk Management Policy" established by the Board of Directors, our Company considers risk identification, assessment, monitoring, control
and reduction, as well as the verification and review of enhancements for each risk category to be the basis of the risk mana gement. Accordingly, compliancewith the various limits and risk management plans established by each Group company is monitored and the results are reported to the Board of Directors, etc.
Risk management structures for each risk category of Group companies shall be as follows.
(i) Credit risk management
The major credit risk in our Group arises from investment transactions of surplus funds accompanying asset administration operations. Each Group
company has established its own credit rating and self-assessment systems, set various credit risk limits, and monitors compliance with these limits based on
their own policies, etc.
(ii) Market risk management
Our Group’s financial instruments, which are a major market risk and impacted by interest rate risks, are loans to the Government of Japan, etc.,
government-guaranteed bonds and other securities, receivables under resale agreements, call loans, etc. The Basis Point Value (BPV) method (which

118

measures the change in the value of these assets for each one basis point (0.01%) movement in interest rates) is adopted to conduct quantitative analysis in
the management of interest rate risk. As of the end of March 2019, the total BPV of financial instruments held by Group companies amounted to ¥50 million.
(iii) Liquidity risk management
Regarding cash flow risks, fully recognizing that funding could be disrupted by the emergence of risks, and in some cases, leading directly to the bankruptcy
of our Group, we work to formulate and disseminate policies aimed at the development and establishment of an appropriate system for cash flow risk
management.
Our Group manages by identifying cash flow mismatches, ensuring compliance with upper limits on funding from the market, liquidity stress testing, etc. In
the event of liquidity risk or a crisis at a subsidiary, the Group will take the necessary measures as stipulated in the "Risk Management Rules" based on thesubsidiary’s reports.
(4) Supplementary explanation of fair value of financial instruments
Fair value of financial instruments is based on their market price, and when market prices are not available, prices based on reasonable estimates arereported. Since these estimates involve certain assumptions, in cases where assumptions are subject to change, the value of assets may also change.
2. Fair values of financial instruments
The consolidated balance sheet amount, fair value, and the difference thereof shall be as follows as of March 31, 2019. Those assets for which fair value isrecognized to be extremely difficult to determine are not included (refer to Note 2).
(¥ million)(1) Cash and due from banks(2) Call loans and bills bought(3) Receivables under resale agreements(4) Securities
Available-for-sale securities(5) Loans and bills discounted
Total assets(1) Deposits(2) Call money and bills sold(3) Borrowed money from trust accountTotal liabilities

Consolidated balance
sheet amount
16,030,507
60,00031,155

Fair value

Difference

16,030,507
60,00031,155-294,862
877,192
17,293,717
7,583,969
759,025
9,008,305
17,351,300

294,862
877,192
17,293,717
7,583,969
759,025
9,008,305
17,351,300-

Note 1: Calculation method of the fair value of financial instruments
Assets(1) Cash and due from banks
Regarding due from banks without maturity, since the fair value is close to the book value, the book value concerned is recorded as the fair value. Regarding
due from banks with maturity, since the deposit terms of these instruments are short (1 year or less) and the fair value is close to the book value, the book value
concerned is recorded as the fair value.
(2) Call loans and bills bought, (3) Receivables under resale agreements
Since the contractual terms of these instruments are short (one year or less), and the fair value closely approximates the book value, the book value
concerned is recorded as the fair value.
(4) Securities
The fair value of bonds is based on prices in stock exchanges or those quoted by financial institutions. Notes on securities for each holding purpose aredescribed in "(Securities)."(5) Loans and bills discounted
Since loans are short-term (one year or less) to the Japanese government or government agencies, the fair value is close to the book value, so the book value
is recorded as a fair value.
Liabilities(1) Deposits
Since all deposits are demand deposits, the amount that may be demanded on the date of the closing of consolidated accounts (book value) is regarded to be
the fair value.
(2) Call money and bills sold
Since the contractual terms are short (one year or less), and the fair value is close to the book value, the book value concerned is recorded as the fair value.
(3) Borrowed money from trust accountSince borrowed money from trust account is equivalent to demand deposits, the amount that may be demanded on the date of the closing of consolidated
accounts (book value) is regarded to be the fair value.
Note 2: The consolidated balance sheet amount of financial instruments where it is recognized as being extremely difficult to grasp their respective fair values are as
follows, and they are not included in “Assets, (4) Available-for-sale securities” in the fair value information of financial instruments.
(¥ million)
Category
Consolidated balance
sheet amountUnlisted stocks
762
Unlisted foreign securities
17
Total
780
* Because of the absence of market value quotes for these securities, their fair value is difficult to determine, and their fair value is not disclosed.
Note 3: A scheduled redemption amount of monetary claims and securities with maturity after the consolidated closing date(¥ million)
One year orOver one year
Over three
Over five years
Over seven
Over ten years
lessto three years
years to five
to seven years
years to ten
or less
years or lessor less
years or lessDue from banks
16,020,500
Call loans and bills bought
60,000Receivables under resale agreements
31,155
Securities
Available-for-sale securities with maturity
121,161
137,823
34,934Loans and bills discounted
877,179
Total
17,109,996
137,823
34,934Note 4: Repayment schedule of deposits and interest-bearing debt (liabilities) after the closing date of accounts
One year orOver one year
Over three
Over five years
lessto three years
years to five
to seven years
or less
years or lessor less
Deposits
7,583,969
Call money and bills sold
759,025
Borrowed money from trust account9,008,305
Total
17,351,300-

Over sevenyears to ten
years or less-(¥ million)
Over ten years-* Demand deposits and borrowed money from trust account equivalent to demand deposits are included in the “one year or less” category.
Deposits include balances of current deposits.

19Consolidated Financial Data

(Securities)
Negotiable certificates of deposit included in “Cash and due from banks” are also included in addition to "Securities" in the consolidated balance sheets.
Available-for-sale securities (as of March 31, 2019)(¥ million)
Consolidated balanceType
Acquisition cost
Difference
sheet amount
Bonds
Regional government bonds
Corporate bonds
Subtotal
Bonds
Government
bonds
Those with a consolidated
Regional government bonds
balance sheet amount notexceeding the acquisition
Corporate bonds
cost
OthersSubtotal
Total
Those with a consolidatedbalance sheet amountexceeding the acquisitioncost

46,985244,859
291,844

46,921
244,752
291,674

63
106
170

1,301
816
899
59,00062,018353,862

1,301
816
899
59,00062,018353,692

0
0
0
—

0
169

(Per share information)
Net assets per share
Net income attributable to owners of parent per share¥58,079.11¥429.61(Business combination and other relationships)
Our Company was founded on October 1, 2018 in a joint share transfer between Japan Trustee Services Bank, Ltd. (hereinafter, “JTSB”) and Trust & Custody
Services Bank, Ltd. (hereinafter, “TCSB”). Accounting for the stock transfer was done by adopting the purchase method prescribed in the Accounting Standard forBusiness Combination, where the acquiring company is JTSB and the acquired company is TCSB.
1. Overview of business combination(1) Name and contents of business of acquired company
TCSB
Trust banking(2) Main purpose of the business combination
The purpose of the business combination was to contribute to the further development of the domestic securities settlement market and the enhancement ofinvestment chains in Japan, by achieving stable and high-quality operations and enhancing system development capabilities. This can be done by integrating
the management resources and know-how of JTSB and TCSB in asset administration operations in pursuit of scale economics.
(3) Date of business combination
October 1, 2018(4) Legal form of business combination
Establishment of a holding company through joint share transfer(5) Name of the combined company
JTC Holdings, Ltd. (hereinafter, "JTCHD")(6) Percentage of voting rights acquired
100%(7) Main rationale for determining the acquiring company
Based on factors determining the acquisition under the accounting standards for business combination.
2. Period of performance of the acquired company included in the consolidated financial statements
From October 1, 2018 to March 31, 2019
3. Acquisition cost of acquired company and breakdown of consideration by type
Acquisition cost ¥59,051 million
Fair value of JTCHD’s common stocks issued on the date of the business combination¥59,051 million
4. Transfer ratio of stocks by class, calculation method, and number of shares issued(1) Transfer ratio of stocks by class(i) One share of JTSB common stock to one share of JTCHD common stock(ii) One share of TCSB common stock to 1.02 shares of JTCHD common stock(2) Calculation method
Requests were made to several financial advisors to calculate the share transfer ratio as a third-party appraisal body, and based on the submitted reports,
calculations were made after consultation between the parties concerned.
(3) Number of shares issued
2,040,000 shares of common stock
5. Contents and amounts of major acquisition costs
There is nothing material to be noted.
6. Amount of assets accepted and liabilities assumed on the date of business combination, and the major breakdown thereof(1) Assets
Total assets ¥9,081,132 million
Of which, cash and due from banks¥5,044,091 million
Of which, loans and bills discounted¥3,572,415 million(2) Liabilities
Total liabilities ¥9,022,063 million
Of which, borrowed money from trust account¥3,620,825 million
Of which, call money¥3,532,819 million
Of which, deposits¥1,841,876 million
7. Amount and cause of gain on bargain purchase(1) Amount of gain on bargain purchase¥17 million(2) Cause of gain on bargain purchaseBecause the acquisition cost was less than the net amount allocated to the assets received and liabilities assumed, a difference is recognized as the gain on
bargain purchase.
8. Estimation method and amount of impact on the consolidated statements of income for the consolidated fiscal year under review if the business combination was
assumed to have been completed on the start day of the consolidated fiscal year under review
Ordinary income¥12,483 million
Ordinary profit¥321 million
Net income attributable to owners of parent¥649 million
The above estimated impacts were calculated based on the statements of income of TCSB, which is the acquired company, from April 1, 2018 to September 30,
2018. The estimated impacts include a transfer gain/loss of ¥625 million resulting from a company split recorded as an extraordinary income.
The above estimated amount has not been audited by KPMG AZSA LLC.

2
20

Confirmation Statement from Management
I have confirmed that the consolidated financial statements (consolidated balance sheets,
consolidated statements of income, and consolidated statements of changes in net
assets) for the first term, covering the period from April 1, 2018 to March 31, 2019, arepresented appropriately and that the internal auditing related to the preparation of these
consolidated financial statements functioned effectively.
June 27, 2019

JTC Holdings, Ltd.

Nobumitsu Watanabe,
Representative & CEO

Auditors’ Statement

The Company has received an audit by independent accounting firm KPMG AZSA
LLC in accordance with Paragraph 1, Article 396 of the Companies Act, and received
a report indicating that all material items pertaining to assets and income have beenpresented appropriately in the documents prepared pursuant to the provisions ofParagraph 1, Article 52-28 of the Banking Act.

Segment information Description is omitted as our Group is engaged in a single segment of the trust
banking business.

Risk-monitored loans (loans to bankrupt borrowers, delinquent loans, loans past due for 3
months or more, and restructured loans)
None

21

Basel III: Pillar 3 Capital Adequacy Status, etc.

Based on Article 52-25 of the Banking Act, the consolidated adequacy ratio is calculated according to the formula defined bystandards for a bank holding company to judge the appropriateness of the capital adequacy in light of assets held by the bankholding company and its subsidiaries (Financial Services Agency Notification No. 20 of 2006; hereinafter, “Notification on
Holding”).
In FY2018, our Company calculated the credit risk assets using the Standard Approach (under Japanese standards) and theamount of operational risk equivalents using the Basic Indicator Approach.
As our Company was established on October 1, 2018, figures for FY2017 are not shown.

Composition of Capital Disclosure (consolidated)
Items
Core Capital: Instruments and reserves (1)Directly issued qualifying common shares or preferred shares mandatorily convertible into
common shares capital plus related capital surplus and retained earnings
Of which, capital and capital surplus
Of which, retained earnings
Of which, treasury stock (-)
Of which, planned distribution of income (-)
Of which, other than above
Other accumulated comprehensive income to be included in Core Capital
Of which, foreign currency translation adjustment
Of which, amount related to retirement benefits
Subscription rights to acquire common shares or preferred shares mandatorily convertible into
common shares
Post-adjustment non-controlling interests to be included in Core Capital
Reserves included in Core Capital: Instruments and reserves
Of which, general reserve for possible loan losses
Of which, eligible provisions
Eligible non-cumulative perpetual preferred shares subject to transitional arrangements included
in Core Capital
Eligible capital instruments subject to transitional arrangements included in Core Capital
Capital instruments issued through the measures for strengthening capital by public institutions
included in Core Capital
Amount equivalent to 45% of land revaluation excess subject to transitional arrangements
included in Core Capital
Non-controlling interests subject to transitional arrangements included in Core CapitalCore Capital: Instruments and reserves(A)Core Capital: Instruments and reserves (2)Total intangible fixed assets (excluding those relating to mortgage servicing rights)
Of which, goodwill (including the difference equivalent to goodwill)
Of which, other than goodwill and mortgage servicing rights
Deferred tax assets (excluding those arising from temporary differences)
Shortfall of eligible provisions to expected losses
Capital increase due to securitization transactions
Gains and losses due to changes in own credit risk on fair valued liabilities
Assets for retirement benefits
Investments in own shares (excluding those reported in the Net Assets)
Reciprocal cross-holdings in capital instruments issued by other financial institutions for raising
capital that are held by the Bank
Investments in the capital of banking, financial and insurance entities that are outside the scopeof regulatory consolidation
Amount exceeding the 10% threshold on specified items
Of which, significant investments in the common stock of other financial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences
Amount exceeding the 15% threshold on specified items
Of which, significant investments in the common stock of other financial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences
Core Capital: Regulatory adjustments(B)(¥ million)

FY2018118,442
110,051
8,390
—
—
—
 77
—
 77
—
—
—
—
—
—
—
—
—
—
118,364
28,09328,093
—
—
—
—
162

4,126
—
—
4,126
—
—
—
—
32,3822
22

(¥ million)

Items

FY2018Amount of capital ((A)–(B))(C)
Risk-weighted Assets (3)Credit risk assets
Of which, total of items included in risk-weighted assets subject to transitional arrangements
Of which, exposure to other financial institutions
Of which, other than above
Amount equivalent to market risk divided by 8%
Amount equivalent to operational risk divided by 8%
Credit risk-weighted assets adjustments
Amount equivalent to operational risk adjustments
Total risk-weighted assets(D)
Consolidated Capital Adequacy Ratio
Consolidated Capital Adequacy Ratio ((C)/(D))

85,982

Capital132,447————
98,566——
231,01337.21%

23

Basel III: Pillar 3 Capital Adequacy Status, etc.

Qualitative Disclosure Matters
1. Scope of consolidation(1) Cause of differences between companies affiliated to the group subject to thecalculation of consolidated capital adequacy ratio pursuant to the provisions of Article
15 of the Notification on Holding (hereinafter, "Holding Company Group") andcompanies included in the scope of accounting consolidation
None(2) Number of consolidated subsidiaries in the Holding Company Group, names of major
consolidated subsidiaries, and contents of main business
The holding company group consists of the following two consolidated subsidiaries.
Name

Content of Main BusinessJapan Trustee Services Bank, Ltd.

Trust banking business

Trust & Custody Services Bank, Ltd.

Trust banking business(3) Number, names, total and net asset in the balance sheets, and contents of main
business of affiliated corporations, etc. engaged in financial services to which Article
21 of the Notification on Holding is applied
None(4) Names ,total and net assets in the balance sheets, and contents of main business ofthe companies that are affiliated with the Holding Company Group but are notincluded in the scope of accounting consolidation, and of the companies that are notaffiliated with the Holding Company Group but are included in the scope ofaccounting consolidation
None(5) Outline of restrictions, etc. on the transfer of funds and capital within the Holding
Company GroupNone

2. Main features of regulatory capital instruments
Issuer

JTC Holdings

Instruments type

Common stock

Amount recognized in Core Capital (consolidated)¥118,364 million

3. Assessment of capital adequacy
As a method of assessing capital adequacy, our Group implements management byrequired capital according to the Capital Adequacy Framework (Pillar 1) and integrated
risk management according to internal controls (Pillar 2).
(1) Capital management
As a bank complying with Japanese standards, we strive to maintain and secure acertain level of required capital in accordance with the Capital Adequacy Framework.
(2) Integrated risk management
Our Group carries out integrated risk management based on the "CapitalManagement Policy," "Basic Risk Management Policy," and "Risk Management
Rules." Specifically, after setting limits on capital that consider a certain buffer intimes of stress, we confirm that the integrated risk quantity of credit, market andoperational risks are within the limits. In addition, for cash flow and other liquidity risks
that cannot be identified by the integrated risk quantity, stress tests are conducted
and reported to the Management Committee and the Board of Directors, including thestatus of compliance with the limitations.

224

[Risk capital management method]
Buffer during stress(Ceiling)(Quantity of risk used)
CapitalCredit risk
Credit risk
Market risk (interest rate risk)
Operational risk

Market risk (interest rate risk)
Operational risk

4. Credit risks(1) Risk management policy and outline of procedures(i) Definition of credit risk
Credit risk shall refer to “the risk of incurring losses due to a decline in orcomplete loss of asset value (including off-balance assets) as a result of thedeterioration in the financial condition of borrowers.”(ii) Characteristics of credit risk
The major credit risk in our Group arises from investment transactions ofsurplus funds accompanying asset administration operations, as a result of default
by major borrowers and a large amount of bad debts due to deterioration in credit
standing (or provision of allowance).
(iii) Risk management policy
Our Company has established the "Basic Risk Management Policy," stipulating
the subsidiary banks’ compliance with the credit risk management policy to keep
the scale and content of credit risks to the minimum necessary to mitigate risks.
(iv) Credit risk management structure
Our Company oversees credit risk management for the entire Group and works
to improve the structures of each Group company.
At subsidiary banks, important decisions on risk management, including
deliberation and approval of various credit risk limits and risk management actionplans, are made by the Risk Management Deliberation Committee, ALM
Committee, as well as the Management Committee and the Board of Directors.
The Risk Management Department, which manages credit risk of the subsidiarybanks, supervises compliance with various limits and verifies the rating system.
Monitoring results of credit risk amounts, changes in ratings, compliance withlimits, etc. are regularly reported to the Risk Management Deliberation Committee
and ALM Committee.
(v) Credit rating, self-assessment, and write-off and reserve
A. Credit rating
As the basis of credit management, "credit rating" represents the credit
status of obligors and the possibility of default and loss in stages. Our Grouphas established an "internal rating" for financial institutions, etc. as credit
ratings with reference to external ratings.

25Basel III: Pillar 3 Capital Adequacy Status, etc.

B. Self-assessment
Self-assessment is a preparatory process for write-offs and reserves
conducted by individually examining the contents of assets owned by ourGroup and categorizing them according to the risk level of recovery or
impairing values. Our Group has established regulations to define selfassessment standards, etc. for proper implementation of self-assessment.
Borrowers are judged by the "category of obligators" according to their financial
condition at each incident that affects disclosure of financial statements andtheir credit. In addition, a "classification category" is periodically determined foreach asset based on the assessment results and the protection status, etc., ofobligators’ category, reflected in write-offs and reserves appropriately, and also
used for credit risk management.
C. Write-offs and reserves
Write-offs and reserves shall refer to estimating the expected amount of
future losses based on the actual results of self-assessment, and considering
the actual status of loan losses, etc. appropriately and in a timely manner, andmaking an allowance for or write-off of the amount in the account settlement foreach half-term. Our Group has established regulations, etc. on write-off andreserve standards at subsidiary banks to ensure proper management of writeoffs and reserves.
(2) Portfolios applying the Standard Approach
Name of qualified rating agency, etc. used for determining risk weight
Our Group uses the following five qualified rating agencies to determine the risk
weights.
Names of qualified rating agencies• Japan Credit Rating Agency, Ltd. (JCR)• Rating and Investment Information, Inc. (R&I)• Moody's Investors Service, Inc. (Moody's)• S&P Global Ratings (S&P)• Fitch Ratings Limited(Fitch)

5. Risk management policy for Credit Risk Mitigation Techniques and outline ofprocedures(1) Credit Risk Mitigation Techniques
Credit risk control is achieved not only by reducing the balance of credit, but also
by promoting protection of accounts receivables using collateral, guarantees, etc.
Such protection of accounts receivables are collectively called the "Credit Risk
Mitigation Techniques."
In calculating credit risk assets, our Group reflects the effects of credit risk
mitigation through accurate collateral and guarantees based on the Notification.
(2) Major types of collateral
Our Group is currently mitigating credit risks by accepting qualified financial
collateral, etc., which are regularly evaluated.

226

6. Risk management policy and outline of procedures for risks related tocounterparties of derivative and long-settlement transactions
Derivative transactions for financial institutions are risk controlled in our Group by
each credit management system, protection by collateral and the reserve calculation
policy.

7. Securitization exposures
None

8. Market risks
Our Group does not include market risk equivalents in the calculation of capital
adequacy ratio.

9. Operational risks(1) Definition of operational risk
Operational risk shall refer to the “risk of our Group incurring losses resulting frominappropriate business processes, activities by officers and employees and systems,
or from external events. Our Group categorizes operational risk into administrativerisk, system risk, information security risk, legal and compliance risk, personnel risk,
tangible asset risk, and reputation risk and manages them.
(2) Operational risk management policy
Recognizing operational risk as an unavoidable risk in the course of our business
operations, our Group is committed to ensuring sound and appropriate business
operations through proper risk management in accordance with the operations andthe scale and nature of risks.
(3) Operational risk management structure
At our Company, the Board of Directors determines basic matters of operationalrisk management, and receives reports on the risk management plan and operationalrisk status of subsidiary banks on a regular and as-needed basis to implement
operational risk management.
Subsidiary banks have also established the Basic Operational Risk Management
Policy to appropriately identify and manage the risks. In addition, the Board of
Directors of each company determines important matters related to operational risk
management.
(4) Compliance with the Capital Adequacy Framework
Our Group calculates the amount equivalent to operational risks under the Capital
Adequacy Framework using the Basic Indicator Approach.

27

Basel III: Pillar 3 Capital Adequacy Status, etc.

10. Risk management policy and outline of procedures for capital contribution orequity exposures
Our Group has a credit risk management system in place to manage default andother risks. Regarding the evaluation of securities for which the determination of fairvalue is extremely difficult, the original purchase prices are employed based on themoving average method or amortized cost method.

11. Interest rate risks(1) Risk management policy and outline of procedures(i) Definition of interest rate risk in the banking bookInterest rate risk in the banking book (hereinafter, "IRRBB") is the risk of
incurring damage in the bank’s current or future capital and income due to an
adverse fluctuation in the level of interest rates affecting the bank's banking bookposition.
The present value is regarded as the economic value (EVE), and the loss
margin to the current interest rate level is measured as ⊿EVE for each. The scopeof measurement includes positions with interest rate risk in the banking book of
subsidiaries.
(ii) Characteristics of IRRBBIRRBB is incurred by a maturity mismatch (gap risk), interest rate mismatch(basis risk), and other factors in the banking book position. The Ratio of ⊿EVE toCore Capital for our Company and the subsidiaries was well below the regulatorylevel of 20%, maintaining a low level of IRRBB.
(iii) Management structure of IRRBBOur Company supervises and manages the IRRBB of the Group as a whole.
(iv) Management method of IRRBB
Subsidiary banks regularly measure IRRBB and report to the Risk Management
Deliberation Committee and ALM Committee.
(2) Outline of the interest rate risk calculation method used by the holding company
group for internal management(i) Calculation method of interest rate risk
The assumptions used in calculating IRRBB are as follows.
• Core deposits are not set, but liquid deposits are set as funds with no maturity• Nothing applies to early cancellation of time deposits, early redemption of
personal loans and handling of foreign currencies.
(ii) Interest rate risk other than ⊿EVE
At subsidiary banks, the BPV (basis point value) is used to measure andmanage interest rate risks.

228

Quantitative Disclosure Matters
1. Among subsidiary corporations, etc. that were financial institutions, etc., of abank holding company, names of the company that went below the required
capital under the capital adequacy regulations and the total amount that wasless than the required capitalNone

2. Capital adequacy (consolidated capital adequacy ratio)(¥ million)

Items
Capital Requirements for Credit Risk
Portfolios Applying the Standard Approach
Securitization Exposures
Eligible Central Counterparty Exposures
Capital Requirements for Operational Risk
Basic Indicator Approach
Total Consolidated Capital Requirements (Risk-weighted Assets × 4%)

FY2018
3,643
1,654
3,942
9,240

3. Credit risks(1) Year-end balance of exposures related to credit risk and breakdown by major type(¥ million)

FY2018Year-end balance of exposure

Domestic

Off-balance sheet
amounts excluding loans,
commitments andderivatives

Securities

OthersTotal

1,090,903

295,564

16,155,858

17,542,326

Overseas

0

18

681

700

Total by region

1,090,903

295,583

16,156,540

17,543,026

Japanese central
government andcentral bank895,70249,084

15,933,102

16,877,888

0

45,432

96,794142,227

Financial
institutions
Others:195,200

201,066

126,643

522,910

Total by industry

1,090,903

295,583

16,156,540

17,543,026

One year or less

1,079,703

121,319

5,462,234

6,663,257

0

173,4820173,482

11,200781

10,694,305

10,706,286

Over one year
Exposures with nomaturity dates

Total by Residual
Contractual
1,090,903
295,583
16,156,540
17,543,026
Maturity*The year-end balance for the period under review was not significantly different from the risk position during theperiod.

(2) Status of overdue exposures
None(3) Status of Reserve for possible loan losses and write-offs of claims
None

29

Basel III: Pillar 3 Capital Adequacy Status, etc.

(4) Balance of exposures to which the Standard Approach is applied by risk-weightcategory (after taking into account the effect of credit risk mitigation techniques)(¥ million)

Risk WeightOn-balance
sheet amount
16,960,066
109,726
202,227
17,1299,010
17,298,160

0%
10%
20%
100%
250%
1250%
Total

FY2018Off-balance
sheet amount
213,711
213,711

Total
17,173,777
109,726
202,227
17,1299,010
17,511,871

4. Credit Risk Mitigation Techniques
 Amount of exposures with Credit Risk Mitigation Techniques applied(Our Group uses the Standard Approach to calculate credit risk assets.)(¥ million)

FY2018
Guarantees

Total

31,155

274,680

305,835

31,155

274,680

305,835

Qualified financial
collateral
Portfolios to which the Standard
Approach is applied
Total

5. Counterparties of derivative and long-settlement transactions
None

6. Securitization exposures
None

7. Market risks
None

3
30

8. Equity exposures(1) Consolidated balance sheet amount and fair value(¥ million)

Items

Listed equity exposures
Investment/equity exposure other than the above

FY2018
Consolidatedbalance sheet
amount780

Fair value-(2) Gains/Losses on sale and write-off of equity exposure
None(3) Unrealized gains/losses recognized in the balance sheets and not recognized in thestatements of income
None(4) Unrealized gains/losses not recognized in the balance sheets and the statements ofincomeNone

9. Gains/losses and changes in economic values to rate shocks used by theholding company group under internal controls for the interest rate risk
IRRBB1: Interest rate risk(¥ million)

Item No.
1
2
3
4
5
6
7

⊿EVE
Parallel up
Parallel down
Steepener
Flattener
Short rate up
Short rate down
Maximum value

8Core capital

FY20185,550
 5,5505,550
FY201885,98231

Disclosure Matters concerning Compensation, Etc.

The section is intended to disclose matters related to compensation, etc., specified separately by the Commissioner of the
Financial Services Agency (Financial Services Agency Public Notice No. 21 of 2012), that may have a material impact on thestatus of business operations or assets of banks, etc., based on Article 34-26, Paragraph 1, Item 5, etc. of the Ordinance for
Enforcement of the Banking Act (Ordinance of the Ministry of Finance No. 10 of 1982).
1. Matters related to the development of an organizational structure for compensation, etc. ofApplicable Officers and Employees of our Group(1) Scope of "Applicable Officers and Employees"
The following shall describe the scope of "Applicable Officers" and "Applicable Employees,etc." (collectively referred to as "Applicable Officers and Employees") set forth in thecompensation notification to be disclosed.
(i) Scope of "Applicable Officers"
Applicable Officers include our Company directors and corporate auditors. Part-timeexternal directors and corporate auditors are excluded.
(ii) Scope of "Applicable Employees, etc."
Of officers and employees who are not Applicable Officers and officers and employees ofmajor consolidated subsidiaries, our Group shall subject "Persons receiving a high amount ofcompensation, etc." having a material impact on the business management or financial
condition of our Company and the major consolidated subsidiaries to disclosure as“Applicable Employees, etc.” There are no Applicable Employees, etc. among officers andemployees other than Applicable Officers in our Company and officers and employees inmajor consolidated subsidiaries, etc.
(A) Scope of Major Consolidated Subsidiaries
Major Consolidated Subsidiaries shall refer to a consolidated subsidiary that has total
assets representing more than 2% of the consolidated total assets, and has a significant
consequence on the Group's management, and apply to Japan Trustee Services Bank,
Ltd. and Trust & Custody Services Bank, Ltd.
(B) Scope of "Persons receiving a high amount of compensation, etc."
Persons receiving a high amount of compensation, etc. shall refer to those who receive
compensation, etc. exceeding the standard amount from our Company and the main
consolidated subsidiaries. The base amount is set at ¥21 million in our Group. The said
amount has been established based on the average annual amount of compensation forApplicable Officers in FY2018 (October to March). Since the compensation system andlevel are not significantly different among major consolidated subsidiaries of ourCompany, the base amount is commonly applied to major consolidated subsidiaries.
With regard to lump-sum retirement benefit, the amount obtained by first deducting thefull amount of a lump-sum retirement benefit from the compensation, etc., then adding
back the "amount obtained by dividing the lump-sum retirement benefit by the number ofservice years" is deemed to be the amount of compensation, etc. for the person, todetermine Persons receiving a high amount of compensation, etc.
(C) Scope of Person having a material impact on the business management or financial
condition of the GroupA Person having a material impact on the business management or financial conditionof our Group shall refer to those whose transactions and management matters regularly
conducted have a considerable impact on the business management, or could cause
loss with a significant impact on the financial condition of our Company, our Group andthe major consolidated subsidiaries.
(2) Determination of compensation, etc. for Applicable Officers and Employees(i) Determination of compensation, etc. for Applicable Officers
At our Company, the maximum amount of total compensation paid to officers is resolved*
by the General Meeting of Shareholders. The Board of Directors is wholly trusted with theallocation of compensation to individual directors resolved by the General Meeting of
Shareholders. Allocation of compensation to individual corporate auditors is wholly
determined by consultation among corporate auditors.
* The provisions of the Articles of Incorporation govern the period between theestablishment of our Company and the conclusion of the first Ordinary General Meeting of
Shareholders.

332

2. Matters related to assessment of appropriate design and operation of systems for compensation,etc. of Applicable Officers and Employees of our Group(1) Policies concerning compensation, etc.
(i) Policies on compensation, etc. for Applicable Officers
At our Company, the General Meeting of Shareholders determines the maximum amountof total compensation for officers Directors’ compensation is resolved by the Board of
Directors, and Corporate Auditors’ compensation is determined by consultation among
Corporate Auditors within the limit of the total amount of compensation resolved by theGeneral Meeting of Shareholders.
3. Matters related to consistency between systems for compensation, etc. of Applicable Officers andEmployees of our Group and risk management, and linkage between compensation, etc. andperformance
There is a mechanism in place for determining compensation, etc. for Applicable Officers,
where the total amount of compensation for all officers is resolved by the General Meeting of
Shareholders.
4. Matters related to type, total payment amount and payment method of compensation, etc. forApplicable Officers and Employees of our Group
Total amount of compensation, etc. for Applicable Officers and Employees of our Group (from
April 1, 2018 to March 31, 2019)(¥ million)

Category

HeadcountTotalamountTotalamountBasicof fixed compencompensation
sationStockoptionOthersTotalamount ofvariable Bonus
compensation

Retirement
benefits

Applicable
9
169
153
152
—
1
—
—
16
Officers
Notes: 1. Compensation, etc. for Applicable Officers include compensation, etc. for officers in major
consolidated subsidiaries.
2. Retirement benefits describe the amount of "retirement benefits for directors" and "provision for
directors’ retirement benefits" that accrued in the corresponding fiscal year.

5. Other reference matters related to compensation, etc. for Applicable Officers and employees of
our Group
There is no applicable matter other than those listed in the preceding paragraphs.

33

Disclosure Matters concerning Compensation, Etc.

Disclosure Items under theOrdinance for Enforcement of the
Banking Act and other Laws

Matters to be stated as specified in Article 34-26 of the Ordinance for Enforcement of the Banking Act (listedon the following page) Following matters related to the outline and organization of
2. Amount of loans listed below and the total thereof
the Bank Holding Company.
(1) Loans falling under the category of loans to bankrupt
1. Management organization (including businessborrowers _______________________________________ 21
management structures of subsidiaries, etc. of(2) Loans falling under the category of delinquent loans _____ 21
Bank Holding Company) ____________________ 5, 7~9(3) Loans falling under the category of loans past due 3months or more __________________________________ 21
2. Capital and total number of shares issued ___________ 3(4) Loans falling under the category of restructured loans ____ 21
3. Following matters related to 10 or more
3. Matters specified separately by the Commissioner of theshareholders in descending order of the number ofFinancial Services Agency on capital adequacy _______
shares held________________________________________ 22~31(1) Name (in cases where the shareholder is a
corporation or other organization, their names) ___________ 3 4. Segment information prescribed in Paragraph 1, Article 15-2(2) Number of shares held by each shareholder _____________ 3
of the Regulation on Terminology, Forms, and Preparation(3) Ratio of the number of shares held by each
Methods of Consolidated Financial Statements _____ 21
shareholder to the total number of shares issued _________ 3
5. When the consolidated balance sheets and consolidated
4. Names and titles of directors and corporate
statements of income have been audited by accounting
auditors ______________________________________ 4
auditors under Article 396, Paragraph 1 of the Companies
5. Name of accounting auditor _____________________ 21
Act, a statement to that effect Following matters related to the outline of Bank Holding___________________________________________ 21
Company and the subsidiaries, etc.
 Disclosure matters concerning compensation, etc.
1. Major business contents and organizations of
32~33
Bank Holding Company and the subsidiaries, etc.3, 5, 37, 97
2. Following matters related to subsidiaries, etc. of
Financial Services Agency Public Notice No. 7 of 2014
Bank Holding Company(1) Name ____________________________________________ 3 1. Composition of capital disclosure ______________ 22~23(2) Address of main office _______________________________ 3 2. Qualitative disclosure matters _________________ 24~28(3) Capital or contribution _______________________________ 3 3. Quantitative disclosure matters _______________ 29~31(4) Lines of business __________________________________ 3(5) Establishment _____________________________________ 3(6) Ratio of voting rights of subsidiaries, etc. held byBank Holding Company to the number of voting
rights held by all shareholders or all contributors __________ 3(7) Ratio of voting rights of a single subsidiary, etc. ofBank Holding Company, held by another subsidiary,etc. other than said single subsidiary, etc. to thenumber of voting rights held by all shareholders or all
contributors ___________________________________ None Matters listed below related to the main business of Bank
Holding Company and the subsidiaries, etc.
1. Overview of business in the latest fiscal year _______________________________________________ 6, 40, 130
2. Matters listed below as the indicators showing
status of main business for the last 5 consolidated
fiscal years(1) Ordinary income __________________________________ 14(2) Ordinary profit or loss ______________________________ 14(3) Net income attributable to owners of a parent or net
loss attributable to owners of a parent _________________ 14(4) Comprehensive income ____________________________ 14(5) Net assets _______________________________________ 14(6) Total assets ______________________________________ 14(7) Consolidated capital adequacy ratio ___________________ 14

 Following matters related to the assets in the last 2
consolidated fiscal years of Bank Holding Company andthe subsidiaries, etc.
1. Consolidated balance sheets, consolidated
statements of income and consolidated
statements of changes in net assets ____________ 14~16

Japan Trustee Services
Bank, Ltd.

CONTENTS Corporate Data
Corporate Governance Framework
Key Indicators of Management Condition
Review of Business Performance
Initiatives to Improve Services

36
38
39
40
41

■ Systems and Measures to Reflect Customer Opinions in Our Services■ Initiatives for Enhancing Information Provision Services■ Initiatives to Meet Various Needs• More Collaborative STP in Standing Settlement Instructions (SSI):
Introduction of Omgeo ALERT/GC Direct from DTCC
• Back Office Outsourcing Services for Asset Management Companies• Handling of OTC Derivative Transactions• Foreign Investment Trust Transactions Using the Fund Settlement Service• Participation in Custody Services for Foreign Stock Certificates, etc.
• Securities Lending Services• Domestic Stock Proxy Voting Business• Domestic Stock Transition Management■ CSR Initiatives

Processing Systems Infrastructure

57■ Initiatives for Improving Processing Quality■ Active Initiatives for Reforming Securities Settlement and Other Functions■ Overall Composition of Company Systems■ Systems Development and Operations Management Framework■ Information Security Management

Internal Management Systems

63■ Risk Management Systems■ Compliance Systems■ Crisis Management Systems (Business Continuity Plans)■ Internal Auditing Systems

Financial Section

69

Corporate Data (As of July 1, 2019)
Corporate Profile

History

Corporate name

Japan Trustee Services Bank,Ltd.

Establishment

June 20, 2000

Head Office address

Harumi Island Triton Square
Tower Y, 8-11, Harumi 1chome, Chuo-ku, Tokyo

Representative

Yoshikazu Tanaka,
Representative Director andPresident

TEL

03-6220-2001

Capital¥51.0 billion

Major shareholders

JTC Holdings, Ltd.
1,020,000 shares (100%)

URL

https://www.japantrustee.co.jp/

Branch network

Head Office only

AgentsBank agents: None
Trust bank agents: 1

Established on June 20, 2000, as Japan’s firsttrust bank specializing in the asset administration
business, by Daiwa Bank (currently, Resona Bank)and Sumitomo Trust & Banking (currently,
Sumitomo Mitsui Trust Bank) and commenced
operations on July 25, 2000. In October of thesame year, Sumitomo Trust & Banking (at the time)transferred its trust and certain other assets to
JTSB, and, in June 2001, the transfer of the trustand certain other assets of the then-Daiwa Bank (atthe time) to JTSB was completed. In September
2002, Mitsui Trust Holdings (currently, Sumitomo
Mitsui Trust Holdings) invested in JTSB, and, in
September 2003, the transfer of the trust and otherassets of Mitsui Asset Trust Bank (at the time) wascompleted. In October 2018, JTC Holdings wasestablished through a joint stock transfer with Trust& Custody Services Bank. As of the end of March
2019, the balance of trust assets exceeded ¥291
trillion.

Corporate Officers
Title

Name

Representative Director andPresident
Representative Director and
Deputy President
Representative Director and
Deputy President

Yoshikazu Tanaka

Managing Director

Masato Tanabe
Yuji Takei
Takahiro Ishi
Hiroki Tanaka
Tatsuya Tsuboi
Yasutada Yatsuda
Yoshihide Haze
Naoyuki Ohashi
Satoshi Sato
Masaaki Tagawa
Masao Maeda
Yasushi Kasahara
Toshiyuki Hioki

Managing Director
Managing Director
Director
Corporate Auditor (Full-time)
Corporate Auditor (Full-time)
Corporate Auditor
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer

Hiroshi Takahashi
Masatoshi Noguchi

336Organization Chart

Planning and Administration Group

Corporate Risk Management Department

President

General Meetingof Shareholders

Board of Directors

Internal Audit Department

Compliance Department
Operations Planning Department
IT Management Department

Consolidation Designing Department
Consolidated IT Designing Department
Corporate Administration Department
Human Resource Department

TreasuryGroup

Executive
Committee

Board ofAuditors

Corporate Planning Department

Treasury Department

Business
Promotion
Group

Business Promotion Department
Customer Services Center
Securities Finance and Investment Department

Client Service Department
Investment Trust Department

Trust Business Group

Customer Services Center (Investment Trust)Fund Services Department 1
Fund Services Department 2
Settlement Management Department
Domestic Securities Department
Global Securities Department
Global Market Research Center
Corporate Actions Department
Administrative Operations Department
IT Planning Department

Core Systems Development Department

System Development Department 2

IT Infrastructure & Technology Department
System Operations Department

IT
Technology
andOperations
Unit

System Development Department 3

IT Group

System Development Department 1

Development
Promotion Unit

IT & Business Promotion Department

 Accounting Auditor: KPMG AZSA LLC

37

Corporate Governance Framework● Business Decision Making and Roles of the Board of Directors
The Board of Directors makes decisions on important management matters and supervises the directors in the
conduct of their duties. An Executive Committee has been established under the Board of Directors. This
committee is responsible for deliberation, as part of the decision-making process in the conduct of business
operations, regarding basic management policies and important individual items. The committee also works toshare information and confirm the status of the execution of business activities. Its responsibilities also include
reporting important information to the Board of Directors. The Executive Committee comprises all the directors
and executive officers, and auditors may attend meetings of this committee and express their opinions.
Also, based on the business management contract with JTCHD, which is a shareholder, important matters areapplied and reported, and guidance and advice are received as needed.

● Roles of the Board of Auditors
The Board of Auditors comprises all the auditors, and, as necessary, the auditors and the Board of Auditors
may express their opinions to the directors.
In addition, following the audit policies established by the Board of Auditors, the members of the Board ofAuditors may attend meetings of the Board of Directors and the Executive Committee as well as other important
meetings, monitor the conduct of duties by the Directors and Executive Officers, and, as necessary, express theiropinions and make various kinds of suggestions.
The Internal Audit Department exchanges opinions with participants in periodic meetings and transmits theadvice and other points from the Auditors. Also, as necessary, this department exchanges information as called
for by the occasion.
The Auditors are responsible for reviewing important documents, including draft proposals; conducting various
kinds of hearings and fact-finding activities; on-site research; and other activities to gather information for theirday- to-day auditing activities. In addition, the Auditors hold periodic meetings with the independent auditing
company, receive reports on the status of auditing activities and the results of audits, and exchange opinions. The
Auditors also work to preserve the independence of the independent auditing company and monitor auditing
activities to ensure their proper conduct.
Please note that audit reports are prepared on the status and results of auditing activities, and reports are maderegarding the reports of the Board of Auditors to the Board of Directors. Moreover, the Auditors meet periodicallywith Representative Directors to confirm management policies as well as exchange views regarding the issues
facing the Company and other matters.

● Relationship with Internal Auditing
The Internal Audit Department, which is established as an organization independent from businessdepartments, audits our business activities. Auditors examine the suitability and effectiveness of compliance, risk
management, and other internal controls within business departments, and provide guidance and advice basedon their findings.
The results of internal audits are reported immediately to the bank directors and auditors, and periodically to the
Executive Committee and the Board of Directors.

General Meeting of Shareholders<Our Company>

Application andreportBoard of Directors

Board of Auditors
and Auditors

Executive Committee
Internal Audit
Department
Approval andinstruction

Company Departments

Selection
Monitoring, auditing,suggestions
Reports

3
38

Key Indicators of Management Condition(¥ million)

FY2014FY2015FY2016FY2017FY2018

Ordinary income

27,602

27,891

26,55927,436

29,467

Ordinary profit

788

570

576

1,199

555

Net income

460

348

390

480

344

51,00051,00051,00051,00051,000(1,020,000
shares)(1,020,000
shares)(1,020,000
shares)(1,020,000
shares)(1,020,000
shares)Paid-in Capital(Total number of shares issued)
Net assets

58,70058,981

59,15659,43559,076

Total assets

2,468,835

6,901,302

13,201,888

13,835,275

11,040,555

32,503

141,305

6,807,134

7,840,589

5,309,477―

772,785

49,127

184,058

167,951

Securities

146,042

95,41945,225337

334

Non-consolidated capital
adequacy ratio (Domestic
standard)

38.32%

36.92%

33.41%

31.70%

36.54%

Dividend payout ratio

39.88%

40.95%

40.44%

40.31%―

Number of employees

922

962

1,016

1,052

1,067

20,657

20,036

20,243

20,577

21,956

―

―

―

―

―

Trust account securities

84,888,357

93,515,727

100,693,580

109,179,760

116,317,170

Total entrusted assets

226,512,594

240,176,012

259,118,905

282,074,441

291,898,563

Deposits
Loans

Trust fees
Trust account loans

Notes: 1.
2.

The number of employees includes personnel seconded from Resona Bank, Sumitomo Mitsui Trust Bank, and othercompanies (197 in FY2014, 216 in FY2015, 216 in FY2016, 204 in FY2017, and 189 in FY2018).
The dividend payout ratio for FY2018 does not include dividends from the business merger in September 2018.

Reference: Trends in Total Entrusted Assets (in 5 years)(¥ trillion)

FY2014FY2015FY2016FY2017FY201839

Review of Business Performance● Review of Performance and Results
JTSB aims to be the foremost bank for asset administration, universally recognized as a professional asset
administration group fulfilling a role as a public institution with assured, unwavering confidence. W e have pursued
measures centered on improving customer-centered operations, focusing on the areas of strengthening humanasset development, increasing productivity, and enhancing service quality.
To strengthen human asset development and increase productivity, JTSB is pursing organization-widemeasures for greater responsiveness to customer needs, including strengthening lateral ties between
departments, boosting operational efficiency, and enhancing the capabilities of front-line systems.
To enhance service quality, investment trust operations are handled through the Customer Services Center(Investment Trust) in order to meet customer needs accurately and promptly. JTSB is also working to improvecustomer service in areas other than investment trust operations by expanding the responsiveness of customer
service and information center operations.
For crisis management measures, JTSB conducts regular disaster response training to verify the effectivenessof its business continuity plans. We also strengthen our crisis response capabilities to handle more widespread
emergency situations.
Amid the increasing importance of risk management and legal compliance, JTSB is strengthening its risk
management structure, focusing particularly on information security and other aspects of operational risk. We arealso taking steps to enhance our compliance posture through training programs and other measures to foster agreater awareness of compliance issues among all members.

(Profit and Loss)
Ordinary income rose ¥2,030 million from the previous fiscal year, to ¥29,467 million, due mainly to increases intrust fees and fees and commissions. The principal components of ordinary income were ¥21,956 million in trust
fees, ¥10,342 million in fees and commissions, and -¥2,907 million in interest loss caused by negative interest
rates.
Ordinary expenses rose ¥2,675 million, to ¥28,911 million, mainly due to an increase in general andadministrative expenses. The principal components of ordinary expenses were ¥28,541 million in general andadministrative expenses, and ¥315 million in fees and commissions expenses.
As a result, ordinary profit declined ¥644 million, to ¥555 million, and net income declined ¥135 million, to ¥344
million.

(Assets and Liabilities)
Total assets as of the end of the period declined ¥2,794,720 million to ¥11,040,555 million, due mainly to adecrease in cash and due from banks. The principal components were ¥10,654,415 million in cash and due frombanks, and ¥167,951 million in loans and bills discounted.
Total liabilities declined ¥2,794,361 million, to ¥10,981,478 million, due mainly to a decrease in deposits. The
principal components were ¥5,309,477 million in deposits, and ¥5,634,644 million in borrowed money from trust
account.

(Entrusted Assets)
Total assets entrusted as of the end of period rose ¥9,824,121 million year-on-year to ¥291,898,563 million.

● Issues to Be Addressed
Through strengthening IT governance, improving the efficiency of operations, offering high-value-added
services, and maintaining a high level of reliability through substantial improvements in risk management andinternal controls, we will work to establish a strong reputation as a good partner of our customers and strengthen
its competitiveness.

440

Initiatives to Improve Services

CONTENTS

Systems and Measures to Reflect Customer Opinions in Our
Services

42

Initiatives for Enhancing Information Provision Services

44

Initiatives to Meet Various Needs

48■ More Collaborative STP in Standing Settlement Instructions (SSI):
Introduction of Omgeo ALERT/GC Direct from DTCC
■ Back Office Outsourcing Services for Asset Management Companies■ Handling of OTC Derivative Transactions■ Foreign Investment Trust Transactions Using the Fund Settlement Service■ Participation in Custody Services for Foreign Stock Certificates, etc.
■ Securities Lending Services■ Domestic Stock Proxy Voting Business■ Domestic Stock Transition Management

CSR Initiatives

55

41

Systems and Measures to Reflect Customer Opinions in Our
Services

JTSB, as “a good partner with clients,” has made increasing customer satisfaction one of the objectives in its
Corporate Philosophy. For JTSB, customer satisfaction means providing services for the customers we deal withdirectly and, beyond them, for the affluent lifestyles of their customers––who are subscribers, investors, andbeneficiaries––by administering properly the valuable assets that our customers have entrusted to us.
To attain our management objectives, we have adopted the following guidelines for action: “Respond to
customers by providing proper supervision and accurate processing services with a sense of urgency” and“Continuing at all times to innovate and change to offer even higher quality and services efficiently.” Each andevery member of management and staff in their respective positions is endeavoring on a daily basis to be helpful
and become “a good partner with clients.”

Customers

Inquiries, opinions,requests, andquestionnaire responses

Responses,
JTSB seminars

JTSB
Activities toimproveproducts andservices

Information collaboration
Suggestions for
improvement
Registration

Information
collaboration

Directives for
improvement

Internal departments

Customer interface
systemInformation collaboration

Customer
Analysisservice
information
cards

Customer
Services Center(Investment Trust)
Collaboration
Customer
Services Center

Directives for
improvement

Information
collaboration

Executive Committee● Customer Interface System
JTSB has provided contact points to receive and respond to customer inquiries, opinions, and requests. For
investment trust customers, the Investment Trust CS Center serves this function, and, for non-investment trust
customers, such as specified money trusts, the CS & Information Center acts as the point of contact.
Our organization is divided into fund management, domestic securities administration, foreign security
administration, settlements, and other departments. For one financial instrument, a number of departments may
become involved in a complex fashion. But the Customer Services Center (Investment Trust) and the CS &Information Center, which are the contact points with customers, are working in close liaison with our internal
departments, and they develop and implement various measures to meet customer needs. This system enables
JTSB to respond promptly and accurately to customer inquiries, opinions, and requests.

442

● Questionnaire Surveys of Investment Trust Management and Investment Advisory
Companies
As a good partner with clients and to offer its customers even better services and products, each year, JTSB
conducts a questionnaire survey about its services and products on investment trust management companies andinvestment advisory companies. JTSB treats these opinions and requests as valuable hints and uses them as
inputs in considering service and product improvements. The outcomes of consideration of the survey results arereported at seminars and other meetings several times a year.

● Customer Service Information Cards
To use the customer opinions and the awareness we gain from them to improve our services and products,
JTSB introduced customer service information cards as an information management tool in 2006. Pieces of
information registered by the relevant internal departments and on the same management tool have reachedapproximately 11,100. A responsible department draws on this information registered to provide guidance to therelevant internal departments and make suggestions regarding improvements in services and products.

● JTSB Seminar
Our bank organizes the JTSB Seminar for investment trust management and investment advisory companies.
In FY2018, there have been 94 participants from 50 companies.
Going forward, to attain our aim of being a good partner with clients and delivering them added value, we shallcontinue to offer accurate and timely information to our customers.

Examples of Seminar Themes
 Held on July 26, 2018

Seminar for Investment Trust Management and Investment Advisory Companies(i) Improvement activities report in investment trust business(ii) Transfer pricing system for tax declaration in India(iii) Improvement of services in corporate investment fund business (also WG activity report on foreign
securities CS improvement)(iv) About the latest information pertaining to investment in China(v) About the latest trends in domestic and foreign systems, etc.
(vi) Progress in efforts toward the introduction of CLS settlement

43Initiatives for Enhancing Information Provision Services

In view of the importance of providing information in the asset administration business, JTSB established its
Customer Services Center and Global Market Research Center and is implementing initiatives to enhance thesophistication of its information provision services.

➊ Online Information Provision Services
Along with the rapid advances in Internet-based services and information delivery platforms, our CS &Information Center offers various services and content as well as timely news to customers and is expanding themethods of delivery and diversity of information it provides. The aim of these services is to provide information
useful to customers entrusting assets and investment advisers even more quickly and at a more sophisticatedlevel.
For investment trust managers, JTSB provides data, such as confirmations of completed foreign securities
transactions and information on interest and dividends, that can be input directly into their accounting systems.
Also, as part of activities to improve user support services, JTSB has set up separate dedicated portal sites forcustomers entrusting assets and investment advisers. These sites present easy-to-understand information on how
to read reports as well as answers to frequently asked questions.

Portal Sites
For Customers Entrusting Assets: Online 2.0

For Investment Advisory Companies: JTSB Web Portal

For measures to enhance the convenience of online information services, JTSB has responded to numerous
customer requests and begun offering services earlier in the day (starting at 8:00 a.m.), and improved thefunctionality of its trust report batch inquiry system (added the ability to access information with multiple basedates). Furthermore, in February 2017, we added a function for batch downloading all of the report forms (in PDF
format) for the investment advisory companies.
To respond to customer needs, JTSB has formed an in-house working group for information delivery, and it isproceeding to consider various measures to move forward actively to expand its functions and services.

444

● Information Provision Services: Functions

Customers

Inquiries via the Internet

Inquiries via dedicated network

Online Information Provision
Services* 1
 Trust reports
 Online inquiries
 Data provision services
 Information provision services

Transaction data
(daily)Account balance
data(daily, monthly)

Viewing service for pension
investment fund reports*2

Master trust services
MRK service＊3
 Management report Performance evaluation
 Risk management

E-mail distribution

JTSB website

Transaction
data(daily)Balance data
(daily, monthly)

Consolidated
asset data
(monthly)SYNTAX
data

Asset administration data

Online 2.0
e-mail magazine*6

JTSB News*5

Account and information
systems*1: Online Information Provision Services
Linked to account and information systems, these information services supply customers entrusting assets and fund managers
with content that includes various types of report forms, account balance data, and other information via the Internet.
Report forms are supplied in Excel and CSV formats, making processing easy. (Provision of PDF report forms to investment
advisory companies)
A “quick batch inquiry function” has been added, allowing users to access batch information on multiple funds and multiple
report forms.
A “pension-related reports function” has been added, providing users with online access to the “Current Asset Value Report”
for use in calculating retirement benefit reserves, as well as the “Monthly Income and Expense Statement for Pension
Assets” and the “Monthly Increase and Decrease Statement for Pension Assets” with details on changes in pension asset
principal on a monthly basis.
*2: Viewing service for pension investment fund reports
This service allows customers entrusting pension investment funds to view via the Web data that follows the disclosure
requirements of the revised Trust Business Law.
*3: Master record keeping (MRK) service
This service allows customers entrusting assets to access reports on their assets from a centralized source via the Internet.
SYNTAX data is gathered from trust banks and insurance companies, and data from multiple institutions is put into various
standard forms.
*4 SYNTAX, XNETThis is a data disclosure service that provides information on asset management electronically via a dedicated network.
Data formats are prepared by the original disclosers of the information, namely, Nomura Research Institute and XNET.
*5: JTSB News
This newsletter is delivered via e-mail and is available on the JTSB website. It contains overseas market systems andtaxation, dates of bank holidays, introduction of new products and other items, results of research and analysis, special
features on specific topics, and information on domestic takeover bids and other corporate actions.
*6: Online 2.0 e-mail magazine
This information service sends e-mails on topics that include notifications of newly released functions, introductions toconvenient services, and answers to frequently asked questions.

45

Initiatives for Enhancing Information Provision Services● Master Trust Services<MRK service 2 for master record keeping (MRK)>Our Company consolidates assets allocated over multiple asset administration agencies into centralized
reporting to provide the Master Trust service via the Internet.
We started providing this service in May 2001, but, in order to meet the diverse analysis needs of our clients
arising from the diversification of management techniques in recent years, since October 2016 when the provided
report forms were revised, we have been providing report forms that are easier to read and can be used more
flexibly.

➋ Global Market Research Center
As part of its initiatives to increase the sophistication of asset administration services, our Global Market
Research Center gathers information and undertakes research and analysis on a range of topics related to foreign
securities markets. These include the settlement systems in overseas markets, taxation, dates of bank holidays,
and new investment products. This information is made available through JTSB News, and the Global Market
Research Center responds to questions regarding the content of JTSB News. These information services have
won high acclaim from many customers entrusting assets and fund managers.
Going forward, through stronger collaboration with overseas custodian banks, the center will gather informationon the securities exchanges of various countries, central banks, regulatory authorities, industry associations, andmedia. The center will also make use of local consultants for information and advice on tax and legal matters, and,as necessary, gather the latest information on legal systems, settlement systems, taxation, and other subjects byconducting on-the-spot surveys and research. Through these activities, the center is working to further increase
the level of its research and analysis.

Response to the Diversification in Investment Targets
Investment in foreign securities, along with conventional European and U.S. markets, has in recent years
trended toward increased investment in emerging *1 markets and frontier*2 markets in Asia, South America, theMiddle East, and Africa in line with diversification in investment targets. However, the market practices, regulations,taxation, and other aspects of these local markets remain complex. Making an initial investment often requires
complicated procedures, such as an investment authorization application to local authorities, and related costs.
After the investment is made, investors also need to remain aware of changes in market regulations, taxation
systems, and other developments. JTSB makes full use of information offered by global custodians, local central
banks, tax consultants, and other sources to gather data and conduct research and analysis on various markets.
JTSB is continuing to take initiatives to further improve and increase the sophistication of its asset administration
activities in response to the special features and variability of individual markets.

446

In addition to these activities, JTSB provides Detailed Information by Overseas Market, which will help
customers to make investments in overseas markets as needed.
Along with information directly related to asset management, JTSB offers information systematically on special
features of various markets, mainly emerging and frontier markets, and points requiring attention, including mattersrelated to asset administration.
Regarding markets in developed countries, JTSB selects topics that may have a major impact on asset
administration and practical administrative matters, such as revisions in related systems, taxation, and othermatters, and provides coverage of these topics.
Going forward, JTSB will periodically update the Detailed Information by Overseas Market and provide accurate
and timely information on asset administration that will be useful to customers.
*1 Emerging Markets:
Securities markets in Asia, South America, Eastern Europe, and elsewhere that are still in the economic growth stage.
Since growth rates are high, investors can expect opportunities for a higher return than in the developed countries, but since
there are various regulations regarding investment and these countries are influenced by trends in the industrializedcountries as well as political and financial factors in their own markets, investment involves some risk.
*2 Frontier Markets:
Securities markets in developing countries that have not reached the stage of being emerging markets.

● Flow of Services Offering Detailed Information by Overseas Market

Globalcustodians

Sub-custodians

Local securities
settlement organizations

Customers

Local central
banks

Information
sourcesReuters and otherinformation vendors

Local tax
consultants

Inquiries
regardingcontent, etc.

Local law offices

Information
gathering

Confirmationof information

JTSB
Global Securities
Department, Global
Planning & CS Team

Detailed informationand data by market

Provision of
information

Regular updating after
confirmation of
information

Detailed
Information by
Global Market

Global Securities
Department, Global
Market Research Center

Checking by lawyers, tax accountants, accountants, and others

47

Initiatives to Meet Various Needs[More Collaborative STP in Standing Settlement Instructions (SSI): Introduction of
Omgeo ALERT/GC Direct from DTCC]JTSB has introduced a new collaborative workflow for asset management companies regarding standing
settlement instructions (SSI) for the custody accounts of investment funds (investment trusts and specified money
trusts) that trade in foreign stocks and bonds.
Asset management companies receive notifications from brokers they trade with through SSI data file linkage ordata linkage through Omgeo ALERT* (hereinafter, “ALERT”), a service provided by the Depository Trust &Clearing Corporation (hereinafter, “DTCC”) in the USA.
These notifications provide SSI data for the custody accounts on which they collaborate with trust banks. Until
now, SSI data has been entered into ALERT by the asset management companies. With DTCC’s implementationof ALERT’s Global Custodian Direct (hereinafter, “GC Direct”), however, data retained by global custodians (GCs)
can now be automatically delivered and shared with other parties involved in the trade (asset managementcompanies, trust banks and brokers) via ALERT.
Under these circumstances, JTSB began using ALERT and implemented the GC Direct workflow in August
2017 to help reduce the work required of asset management companies in order to register SSI data in ALERT,
ensure more reliable registration of SSI data and reduce the risk of failures.
This allows asset management companies to apply to JTSB to create an ALERT account for investment funds
entrusted to JTSB and whose GC has implemented GC Direct, enabling collaborative handling of SSI data throughthe GC Direct workflow.

● Benefits to Asset Management Companies• Reduces the work required of asset management companies in order to register SSI data in ALERT• Ensures more reliable registration of SSI data, reducing the risk of failures in securities settlements

Previous workflow

Custodianbanks

A: Create account
B: Register SSI(v) SSI
registration

Asset
managementcompanies(iv) SSI
communication(iii) SSI
communication

Custodianbanks

D: View SSI(vi)
Receive
SSI

Brokers

A: Create account
D: View SSI(i) Request
to open an
account(i) Request to
open anaccount(ii) Request
to open an
account

Asset
managementcompanies

C: View SSI(v) SSI
registration(ii) Request
to open an
account(vi)
Receive
SSI

Brokers

After introduction of GC Direct(iv) SSI
communication

B: Approve account
D: View SSI(iii) SSI
communication

C: Register SSI* Omgeo ALERT: A database service for storing SSI data provided by DTCC

448

[Back Office Outsourcing Services for Asset Management Companies]
In asset management companies (investment trust management companies/investment advisory companies),
where the practice of fiduciary duty and strengthening investment capacity are the issues, they are concentrating
their resources on the core businesses such as investment management, product lineup and client services;
meanwhile, the need to outsource back office operations is increasing.
Under such circumstances, JTSB launched a specialized unit of outsourcing services for the back officeadministration of asset management companies in 2015, and they include investment trust accounting and NAV
calculation of investment trusts, disclosure service, investment advisory accounting service, etc. (Number of funds
and assets under management of outsourcing contracts as of the end of March 2019: approximately 1,200
funds/¥18 trillion (market capitalization basis))
As the best partner of asset management companies, we will endeavor to provide solutions to diversifying needs
and improve service quality by utilizing the know-how and expertise which we have cultivated as a trust bankspecializing in the asset administration business with a wide range of trustee services and securities settlement
operations, etc.

[Handling of OTC Derivative Transactions]● Meeting the Requirements of International Regulations
We are meeting the requirements of international regulations on derivative transactions triggered by the global
financial crisis, with the awareness that meeting the requirements of these regulations is an important issue in abank specializing in asset administration.
The application of the “Margin requirements for non-centrally cleared derivatives” began to be phased in from
September 2016 in Japan, and application to variable margins management in entrusted assets began in March2017. JTSB has developed systems to meet the requirements of the regulations.
Specifically, regarding margin transfers between asset management companies and dealers, JTSB has also
started carrying out fair valuation of transactions and computation of the necessary margin amount, etc. and as thetrustee has started carrying out monitoring to ensure that entrusted assets are preserved properly.
Going forward, as further strengthening of regulations pertaining to derivative transactions, etc. is anticipated,
we will continue to closely watch the trends of international regulations and implement the necessary responses.

● Continuous Initiatives to Improve Service Quality
In recent years, the volume of derivative transactions has increased, the volume of OTC derivative transactions
has increased in particular, and the diversification of products has progressed. In this context, JTSB expanded its
derivatives system in 2015, and we are aiming to expand the corresponding products and collateral types centeredon the full range of swap transactions.
Furthermore, through the introduction of straight-through processing (STP) for contract orders, etc., we arepromoting the improvement of administrative processes so that administrative streamlining can be achieved inboth the asset management companies and JTSB.

49

Initiatives to Meet Various Needs[Offshore Investment Trust Fund Transactions Using Euroclear Fund Settle Service]Transactions for the offshore investment trusts included in Japanese investment trust funds(FOF Scheme) haveincreased in recent years. Administrative procedures for offshore investment trusts are complex, often involving
contacting different Administrators/Transfer Agents for each security, to ensure accuracy and efficiency ofoperation is becoming increasingly important. Another factor complicating matters is that Administrators/Transfer
Agents principally communicate by facsimile.
JTSB has sought to resolve this situation by partnering with Euroclear to offer the Fundsettle service, introduced
in July 2015. This service centralizes all transaction requests through Euroclear, and uses the highly efficient
SWIFT system, allowing for secure and prompt transaction procedures. This initiative has enhanced satisfaction
among investment trust customers.
Investment trust customers can also simultaneously take advantage of straight-through processing (STP).
Specifically, while Administrators/Transfer Agents normally send result notifications for the transaction requests
they receive by fax or PDF, with the Fundsettle service JTSB will provide this information in data format. Dividend
information can also be provided as data, further enhancing the benefits of STP.

● Main Benefits for Investment Trust Management Companies

Data upload
possible

Without using Fundsettle (Manual processing via fax and PDF)
[Fax]
Trade
Order

Trade
Innstruction

dministrator/Transfer Agent foroffshore investment trust
Administrator/Transfer Agent forthe offshore investment trust[Fax/Email (PDF)] Transaction
result(Contract Notes)

Using Fundsettle service (STP via SWIFT and data)
Trade
Instruction(no change)[SWIFT]
Trade Order
Notification of transaction
resultNotification oftransaction
result(data format, etc.)

BenefitEuroclear

Investment Trust Management
Companies• Transaction results and dividend information available in data format• Quick verification in yen of sales proceeds received from offshore investment trusts• Ability to search for offshore investment trust securities information and transaction request status using a
dedicated browser for the Fund settle service

Notification of transaction result(contract note) provided in data format

Administrator/Transfer Agentfor
Offshorenvestment trust

Administrator/Transfer Agent foroffshore investment trust

Supports
STP

550

[Participation in Custody Services for Foreign Stock Certificates, Etc.]
In recent years, there have been increasing expectations for upgrading the asset administration infrastructure.
Factors accounting for this have included the globalization of Japanese enterprises, fund-raising by foreigncompanies on the TSE, the listing of ETFs invested in Asian stocks (other than Japanese stocks), thecommencement of the calculation of the JPX- Nikkei Index 400 (which may include foreign stocks listed on theTSE), and the listing of foreign stocks (including foreign ETFs) (hereinafter, TSE foreign stock).
Amid this business environment, as an asset administration company specializing previously in domestic assets,
as a first initiative to respond to these trends, JTSB began to participate in the “Custody Services for Foreign Stock
Certificates, etc.” of the Japan Securities Depository Center, Inc. (JASDEC) in August 2014.
As a result, previously, investments in TSE foreign stock could be transferred and settled freely, but throughparticipation under the delivery versus payment (DVP) system, stock, etc., can be transferred and settlements
made, and information can be provided on rights and dividends. These arrangements have further enhanced thesafety and convenience of asset administration.

● Benefits for Investment Trust Management and Investment Advisory Companies• Securities and monetary settlements:
DVP becomes possible• Information on rights and dividends:
JTSB receives directly from JASDECReduces securities and settlement riskTimely provision of information is expected

After participation in the system

Prior to participation in the system
Account management by securities companies as“account management institution”

Securities management by trust bank as a
“JASDEC Participant”

Rights and dividend
information

Transaction of
securities

Requires transfer of the securities
between securities companies
Account management
institution
Securities company A
custody account

Account management
institution
Securities company B
custody account

Account management
institution
Securities company A
custody accountWhen stock A, which was purchased at securities
company A, is sold to securities company B, it wasnecessary to have the stock transferred in advance tosecurities company B.

JASDEC
Account
management
institution

JASDEC

Securities
company A
custody accountRights anddividend
information

Reducessettlement
risk

Securities
company
A Indirect
Rights anddividend
information

Does not require transfer of the securities
between securities companies

JASDECJASDEC

Rights anddividend
information

To investment trust
management and investment
advisory companies

Securities company A, where the custody account is located, obtains
the information on rights and dividends from JASDEC. For this reason,
we could not provide rights and dividend information to the investment
trust management and investment advisory companies unless we
could obtain it from Securities Company A

JASDEC Participant
JTSB trust account

Account management
institution
Securities company B
custody accountWhen the stock is purchased at securities company A, it is transferredto the JTSB trust account through the DVP process. Then, if the stock
is sold at securities company B, it does not require the transfer of
securities between the securities company. Settlement with securities
company B is carried out through a DVP transfer.

JASDEC
Participant

JTSB trust
account

JASDEC
DirectRights anddividend
information

Information
obtained througha timely andsecure process

Rights anddividend
information

To investment trust
management and investment
advisory companies

Information on rights and dividends is obtained directly by JTSB fromJASDEC as a participant in the system. In this way, we are able toprovide information obtained from JASDEC to the investment trust
management and investment advisory companies.

51

Initiatives to Meet Various Needs[Securities Lending Services]As part of initiatives to offer services related to the asset administration business, JTSB is substantially stepping
up its securities lending services with the objective of offering customers high value added.

● Features of JTSB’s Securities Lending Services• JTSB has one of the largest balances of assets for lending in Japan, and its staff have abundant experience insecurities lending operations. JTSB also has high-level lending support systems that enable it to process large
volumes of such transactions quickly. As a result, JTSB ranks among the leading stock and bond lending
institutions in Japan and is working to further expand the scale of its securities lending services.
• Because of the flexibility and careful tailoring of services to meet a wide range of needs of customers entrusting
assets and managers as well as detailed reporting services, JTSB offers lending services that cover a wide
range of products, including pensions, comprehensive securities investment trusts, specified money trusts,
specified individually managed money trusts, and custody.

● Service Development• JTSB was one of the first companies in its industry to offer securities lending and introduce a diverse range oflending methods as well as upgrade its operations with the aim of providing advanced, high-value-added
services for its customers. These activities have included lending securities to actively managed funds throughactive collaboration with investment advisory companies and managers, collateral management schemes
based on the tri-party method for which needs are strong among borrowers, and the introduction of platforms
for securities lending transactions.
• JTSB is continually reviewing and further upgrading its credit and interest rate risk management in line withchanges in the market environment to ensure even safer asset management.
• Going forward also, JTSB will continue to differentiate its services from others through its product and service
planning capabilities and operational strengths as it works to substantially raise the level of its services andmaintain its leading status in the industry.

Mutualchecking
systemMonitoring of the content ofagreements, borrower credit risk,interest rate risk, etc.
Middle office: Corporate Risk Management
Department trust management teamMonitoring of collateralmanagement status

Management ofcollateral funds

Collateral

Lending of
securities

Securities loan
contract
Repurchase
contract

Back office: Domestic Securities and Settlement
Department lending team

Securities
loan
contract

Lending of
securities

Collateral

Borrowing/ lending
markets, financial markets

Front office: Securities Finance andInvestment Department

Overseas

Lending agents

Re-entrustee(JTSB)

Securities processing notifications

Re-entrustment
agreement

Trustee(Re-entrustor)

Trust contract

TrustorDomestic

Agent contract● Lending Scheme

Borrowing/lending markets, financial
markets (Securities companies, etc.)

The general scheme shown above pertains to re-entrustment of securities. A similar scheme for securities lending services is applicable when the
securities are entrusted from one party to another.

552

[Domestic Stock Proxy Voting Business]
In its asset administration activities, JTSB responds flexibly to the needs of its customers regarding domestic
stock proxy voting, which involves the maintenance of important rights, and has appointed specialist staff who canprocess proxy votes promptly and accurately. JTSB strives to execute the electronic instructions from customers
entrusting assets and fund managers speedily and accurately, and, with its originally developed stock proxy voting
management system, is able to offer services of even higher quality.
Also, by arranging for the participation of fund managers in ICJ Co., Ltd.’s *1 Electronic Proxy Voting Platform*2, it
has been possible to strengthen collaboration with ICJ and enable fund managers to exercise their proxy rights
directly and smoothly. Looking ahead, JTSB will take even more active initiatives in the increasingly diverse proxyvoting services area.
*1 ICJ Co., Ltd. is a joint venture, established in July 2004 by the Tokyo Stock Exchange Co., Ltd., the Japan Securities Dealers
Association, and Broadridge Financial Solutions, Inc., with the objective of operating the Electronic Proxy Voting Platform.
*2 The Electronic Proxy Voting Platform is an infrastructure system that enables institutional investors to vote directly the[Document voting]✓ Notice of the General
Meeting of Shareholders ismailed✓ Electronic voting instruction
file is transmitted by e-mail• Notice of theGeneral Meeting of
Shareholders• Stock voting proxy• Stock voting proxy

JTSB✓ Electronic voting
instruction file isreturned by e-mail✓ Exchange of
information on
voting rightsthat are voted
directly

Customers entrusting assets to JTSB
Fund managers

Issuer

ICJ’s Electronic Proxy Voting
Platform

Shareholder registryadministrator

proxies of the shares they own without going through the trust banks that are the shareholders of record.

[Direct voting]✓ The shareholder exercises his voting rights by
inputting voting instructions directly into the ICJElectronic Proxy Voting Platform

53

Initiatives to Meet Various Needs[Domestic Stock Transition Management]
Transition management is provided as part of services incidental to the asset administration business. Transition
management includes restructuring stock portfolios that have been entrusted from customers, and thentransferring them safely and efficiently to separate trust accounts instructed by the customer.

● Features of JTSB’s TM Services
As trustee, JTSB adopts the specified comprehensive trust contract method, and features of its services include
providing a sense of security and transparency to its customers, cost minimization, and anonymity in the market.
(i) In addition to its extensive record of transferring securities documents, JTSB can offer a high-quality service
because of its dedicated systems for transition management execution.
(ii) When transition projects are entrusted, it appoints a specific person in the specialized transition management
unit in the front office on the one hand and, on the other, a specialized transition management unit in the
middle office strictly monitors the activities of the securities company responsible for execution (hereinafter,
executing securities company). In this way, customers are guaranteed a high level of transparency and thebest execution.
(iii) By properly managing market risk exposure and tracking errors, JTSB minimizes costs.
(iv) By selecting the executing securities company from among those that have no capital ties with JTSB, theconflicts of interest that may arise in such transactions with related parties are eliminated.
(v) By having transition management executed by JTSB, as a trust bank that specializes in asset administration,customers can rely on JTSB for thorough management of information and eliminate the possibility ofconflicts of interest in the conduct of transition management services.

● Transition Management (TM) Scheme
Customers(iv) Reports, etc., on
execution(i) Conclusion of the trust contract
Discussion of execution plans

JTSB
Specialized TM fund (a specified comprehensive trust, managed
and operated by JTSB as the trustee)
Former portfolio

Formerfund(ii) Transfer of
securities to a
specialized TM
fund

Matching portion
Non-matching portion(Stocks to be sold andbought)New portfolio

New funds after
the completionof restructuring

New fund(v) Transfer of
securities fromthe specialized
TM fund(iii) Execution of portfolio restructuring

Securities company
responsible for execution

554

CSR Initiatives

JTSB performs its main business as a bank specializing in asset administration faithfully and takes performanceof these duties as the basis for fulfilling its corporate social responsibility (CSR).
With this as a basic assumption, JTSB approaches CSR from three perspectives: “Enhancing customer
satisfaction (CS),” “Enhancing employee satisfaction (ES),” and “activities for preserving the environment andcontributing to society.” We aim to achieve higher level of CSR by ensuring all management and staff take action
from these three perspectives.
As a specific code of conduct for CSR activities, JTSB has established the following policies for action and is
working to raise the awareness of CSR among each and every member of management and staff. As the center ofthese activities, JTSB has established a Companywide cross-divisional CSR and CS Promotion Committee tosupport the activities of all management and staff.

[Policy for CSR Activities]
1. We have a strong awareness of our high-level functions in the social infrastructure in the field of administering
securities and other assets and offer high-quality services promptly and accurately to all our customers.
2. We contribute to the development of our customers and society by developing and providing services thatmeet the needs of our customers.
3. We, as members of society, participate, on an individual and voluntary basis, in activities that contribute to society.
4. We, by contributing to society, work to create a workplace we can each take pride in and work energetically.

● System for Activities

Executive Committee

CSR and CS Promotion Committee
Human Resource Department

Environmental Preservation andSocial Contribution Planning Unit

CS Activities
Planning Unit

ES Activities Planning Unit

Activities of All Management and Staff● Principal Initiatives<<Social Contribution Planning Unit>>
This unit actively engages in a range of projects that contribute to society, including those providing support forthe blood donation activities of the Tokyo Red Cross Blood Donation Center.
<<CS Activities Planning Unit>>
Under its slogan of “Nurture the Tree of Reliability! Make the Smiles of Our Customers Bloom,” this unit isengaging in group discussions and meetings to exchange opinions with other companies with the objectives ofraising the awareness of CS among management and staff and thereby “enhancing CS.”<<ES Activities Planning Unit>>
Activities of this unit include promoting the taking of parental leave of absence among employees and creating
systems to provide assistance to employees raising children. The unit has also established an External Advice andCounseling Desk and is taking steps to enable employees to work with greater peace of mind by creating systems
to help them deal with the problems they may face. In addition, this unit aims to create a corporate culture that
respects the rights of each and every employee and is free of discrimination by aggressively implementing
activities that increase the awareness of human rights, focusing on the Human Rights Education & Training
Promotion Committee.
55

5
56

Processing Systems Infrastructure

CONTENTS

Initiatives for Improving Processing Quality

58

Active Initiatives for Reforming Securities Settlement
and Other Functions

59

Overall Composition of Company Systems

60

Systems Development and Operations
Management Framework

61

Information Security Management

61

57

Processing Systems Infrastructure[Initiatives for Improving Processing Quality]● Activities to Improve Operations Processing Quality
JTSB has established an Operations Planning Department to oversee the construction of operations processing,and is working to improve the quality and efficiency of its operations.
As the JTSB department in overall charge of operational planning, the Operations Planning Department handles
matters related to regulatory issues, taxation, and accounting and is responsible for structuring operation
processing systems that are appropriate for offering products and services to JTSB customers, investment trust
management companies, and investment advisory companies. The department is also in charge of planning andthe promotion of measures pertaining to improvements in processes, standardization, and efficiency enhancement.
Also, as noted in the next section under Processing Risk Management Activities, this department is preparing theway for securing the effectiveness of processing risk management activities.

● Processing Risk Management Activities
With the awareness that minimizing processing risk is one of the most-important issues for JTSB as a company
specializing in asset administration, JTSB has prepared its Processing Risk Management Rules, which contains
basic items for conducting proper and smooth processing operations and for the management of processing risk,
reducing risk, and preventing the emergence of risk. Based on these rules, JTSB engages in control activities totake preventive measures (in advance) and deal with risks that have emerged (after the fact).
<<Preventive measures>>
To prevent accidents and other incidents, JTSB has established processing procedures manuals for all its
processing operations, forbidden non-standard processing, and established mutual checking as standard
procedure.
<<Dealing with risks that have emerged>>
In the event of an accident or other incident, JTSB endeavors to accurately assess the situation, report it quickly,
and take action with the top priority placed on the protection of managed assets. JTSB also analyzes the factors
and issues that caused the incident, formulates measures to prevent reoccurrence and confirms the effectivenessof these measures.

Improving processing
quality

Improving processing
efficiency

Raising capacity for structuring processes

Unit in overall charge of operations planning =Operations Planning Department

Operations Planning Department• Overall charge of structuring operational processes(including those related to regulatory matters, taxation,accounting, and providing products and services to JTSB
customers, who are investment trust managementcompanies and investment advisory companies)• Promotion of processing improvements, standardizationand efficiency enhancement

Other Departments• Taking charge of improvements,
etc., with operating units• Promotion/implementation of
measures adopted by the
Operations Planning Department• Taking preventive (in advance) measures: preparation andupdating of the Processing Procedures manuals• Taking measures after the fact: Management ofprocessing errors

558

[Active Initiatives for Reforming Securities Settlement and Other Functions]
The securities settlement system plays an important role in Japan’s securities transactions as a core element in
the institutional base. JTSB, as a leading company in the asset administration business, is preparing actively torespond to Securities Settlement System Reforms and Domestic Securities Market Reforms. Recent major eventswere the launch of a system to shorten the period of settlement for government bonds in May 2018 and stocks in
July 2019.
In addition, JTSB positions responding appropriately to the International Regulations for derivative transactions,and the Extraterritorial Application of Individual Regulations in the United States and Europe (under which
Japanese financial institutions are subject to regulation) as one of the important issues and has been steadily
doing so.
Category

Field

Upcoming Events

Schedule

The period for settlements from transactions
Shortening the period of (contract) to final settlement (delivery) issettlement for
shortened, and settlement risk in the market as agovernment bonds
whole is reduced.
JTSB has already implemented this system.

May 2018

As part of the shortening of the settlement period
for Japanese government bonds (JGBs),
Handling of newconventional repo transactions with cash
repurchase transactions collateral have now been centralized as new
repurchase transactions as a rule.
JTSB has already implemented this system.

May 2018

Shortening of thesettlement period forstocksThe period for settlements from transactions(contract) to final settlement (delivery) is
shortened, and settlement risk in the market as awhole is reduced.
JTSB has already implemented this system.

July 2019

Measures for stock
lending guidelines

As part of the shortening of the settlement period
for stocks, JTSB has established market-widestock lending guidelines.
JTSB has already implemented this system.

July 2019

Corporate bonds(general bonds)

Corporate bonds(general bonds)
Shortening of thesettlement period

The period between transaction (execution) andsettlement (transfer) will be shortened, andsettlement risk in the market as a whole will be
reduced.
JTSB will take appropriate measures to launch
this system.

July 2020

Derivativetransactions

Restrictions on
margins, etc., fortransactions that will notmake use of a Central
Counterparty Clearing
House (CCP)

Regarding OTC derivatives that will not make useof a Central Counterparty Clearing House (CCP),
non-centrally cleared OTC derivatives settled
directly between parties for the purpose of
reducing settlement risk in the market as a whole
now also require the receipt and payment ofmargins.
JTSB has already implemented this system.

March 2017
Scope:
Variable
margins, etc.

Foreign currency
exchangetransaction

Involvement in CLS
bank PVP settlement
systemDiscussions on enabling PVP settlements
through CLS banks even for investment funds areunderway at relevant organizations.
JTSB will also take measures to enable parties
such as customers to use this service on request.

First half of2020(full-scale
phase)

Global securities
transactions

According to the regulations of FINRA in the
Collateral now required USA, American companies are required to collectfor transactions such as collateral when carrying out transactions such as
TBA transactions
TBA transactions.
JTSB will proceed with appropriate measures.

March 2020

Government bondtransactions

Securities
Settlement System
Reforms
Stock trading

Reduction of
settlement risk
thoughinternational
regulations, etc.

Content and JTSB’s Initiatives

59

Processing Systems Infrastructure[Overall Composition of Company Systems]
Our Company’s systems must perform a full range of integrated securities administration functions to meet theneeds of pension funds, specified money trusts, investment trusts, and other types of customers. These functions
include the processing of transactions, the management of account balances, and the preservation of ownershiprights, through to accounting and reporting on funds. These various functions are performed by an overall systemthat is capable of rapid processing operations and is composed of mutually linked specialized systems performing
distributed processing operations.
By realizing the appropriate combination of mainframe and distributed processing, which may depend on theobjectives and nature of processing operations, we provide customers with the data they need and respondflexibly to their requests.

Japan Securities
Depository Center(JASDEC)*

Japanese Bankers
Association (JBA)

Bank of Japan

External settlement systems

SWIFT
Alliance

Yen funds
management

JBA RC

Individual financial productsystems

Asset administration systems

Fund management system (FM)Stock lending

Management support system

Repurchaseagreement/Repo

Domestic bond management system(Plus One)

Bond lending/borrowing

Global securities STP system
Pension accounting system

Data disclosure systems
Online Information
Provision Services

External settlement systems

660

[Systems Development and Operations Management Framework]

IT Group
IT Planning Department

Mutual collaboration
Planning/ development/ operation
Development
Promotion Unit

IT Technology andOperations Unit

Planning and AdministrationGroup

IT Management Department• System risk management• System development monitoring,
etc.

JTSB has its own system development departments in-house. This makes possible rapid decision-making in ITrelated operations, and the operating departments and IT departments work together in implementing initiatives.
The IT Planning Department, which is responsible for preparing plans and the overall management of IT
operations, the Development Promotion Unit, which is responsible for the seamless implementation of various
activities ranging from identification of tasks and projects to the development of applications, and the IT
Technology and Operations Unit, which is responsible for the development of systems platforms, provision oftechnical support, and system operations, work closely as a team. They respond promptly to the varied anddiverse needs of customers, while maintaining close communication with the operating departments.
In addition, under JTSB’s organizational structure, the IT Management Department, which is responsible for risk
management and is independent of the IT Group, monitors the risk of system development.
Going forward, JTSB will strive to strengthen governance of the IT functions and improve productivity in systemdevelopment.
It will also respond steadily to changes in the environment surrounding the asset administration business andensure the stable operation of its systems infrastructure.

[Information Security Management]
JTSB has structured and audited its information security systems on a systematic basis and has created thenecessary systems for risk management. Today’s asset administration business is based on sophisticatedcomputerized information processing, and requirements for the strict management of information, as represented
by the provisions of Japan’s Personal Information Protection Law, have been tightened substantially.
JTSB sets priority levels for all the information assets it holds based on the risk of losses that customers may
incur because of actions, such as leakage, loss, falsification, etc. Depending on the level of risk, JTSB takes
appropriate security measures for the acquisition, usage, management, storage, internal transmission, andremoval of information assets from the JTSB premises, its disposal, and other such actions.
Also, in managing its information systems, JTSB implements safety precautions and measures to prevent
improper entry, usage, or other such actions. JTSB maintains its computer hardware systems and ensures thatbackup and alternative facilities are kept ready. Through the preparation of backup data and operating manuals,
JTSB implements measures to increase even further the reliability of its hardware, software, and systems
operations.
These security management systems have been based on internationally recognized information security
management guidelines and the safety measures standards issued by The Center for Financial Industry
Information Systems (FISC), a public interest incorporated foundation. JTSB thoroughly reviews its information
systems and information assets, identifies possible threats, ascertains the current risk levels, assesses them, andimplements measures on a continuing basis using the “plan, do, check, act” cycle management approach.

61

6
62

Internal Management Systems

CONTENTS

Risk Management Systems

64

Compliance Systems

65

Crisis Management Systems (Business Continuity Plans)

66

Internal Auditing Systems

68

63

Internal Management Systems[Risk Management Systems]
For JTSB to fulfill its public mission as a trust bank specializing in asset administration, it is required to ensure
the soundness of its management by measuring risk accurately and controlling it. To satisfy this requirement,
JTSB manages operational risk, credit risk, market risk, and liquidity risk using methods appropriate for their
special characteristics and has developed systems for overall, integrated risk management.

● Common Basic Risk Policy•••

JTSB classifies risks by risk categories—namely, operational risk, credit risk, market risk, and liquidity risk—
and manages each of these risks with methods appropriate for their special characteristics.
By managing these risk categories through a process involving identification, assessment, monitoring, control,
and taking steps to reduce risk, JTSB gains an accurate understanding of the status of such risks and takes
appropriate risk management measures. In addition, by gaining an understanding of the aggregate level of risk
in each category, qualitative and quantitative assessments of these risks are conducted to strengthen
integrated risk management that compares and contrasts with the business structures of our Company.
JTSB is aware that the principal risk in its risk profile is operational risk because of its specialization in theasset administration business and, therefore, focuses on the reduction of operational risk.
For other risk categories, our policy is to minimize such risks that may arise in the conduct of its asset
administration business operations.

● Content and Management Systems for Principal Risk Categories
Risk category

Content of risk

Operational risk

The risk of loss resulting from inadequate or failed internal processes, people and systems or fromexternal events.

Credit risk

The risk of losses due to the decline in or complete loss of value of assets (including off-balance
sheet assets) as a result of the deterioration in the financial condition of borrowers.

Market risk

The risk of losses due to the change in value of assets held (including off-balance sheet assets) as
a result of such market risk factors as fluctuations in interest rates, changes in the market price of
securities, foreign exchange rates, and other indicators. In particular, during times of market turmoil
or other adverse circumstances when it becomes impossible to carry out market transactions ortransactions must be conducted on extremely unfavorable terms, this is termed market liquidity risk.

Liquidity risk

The risk of losses due to the inability of obligors to secure sufficient funds to cover financial
obligations because of such factors as deterioration in their financial condition or in cases where
obligors must procure funds at interest rates that are much higher than normal.

Liquidity risk

Market risk

Credit risk

Risk Management Deliberation
Committee (ALM Committee)

Risk Management Deliberation Committee (Operational Risk Committee)
Operational risk
Information security risk
Reputationalrisk

Corporate Risk Management
Department●

Systemrisk

Information
systems relatedrisk

IT Management
Department

Information
management
related risk

Legal &
Processing
Personnel
compliance
risk
risk
risk

Operations Planning
Department

ComplianceDepartment

Human
Resource
Department

Event risk

Corporate
Administration
Department

Risk Management Deliberation Committee (Operational Risk Committee)
Responsible for coordination related to Company-level and interdepartmental operational risk issues in all risk

categories, such as legal and compliance risk as well as personnel risk; promotion of operational risk management
measures; and consideration and deliberation related to strengthening risk management systems.
●

Risk Management Deliberation Committee (ALM Committee)
Responsible for deliberation regarding matters related to lending activities in JTSB’s banking operations, mattersrelated to overall ALM, and matters related to operation and management of market risk and liquidity risk.

6

[Compliance Systems]
To respond to changes in the times accompanying the growing competition among financial institutions that is
extending beyond the financial services industry and the rising sophistication of financial technology, financial
institutions are required to abide strictly by the principle of being responsible for their own actions and maintaining
management transparency. Moreover, as a bank specializing in asset administration, JTSB must comply with alllaws and regulations and fulfill its social responsibilities of contributing broadly to society and the economy, while
also fulfilling its important public mission as a trust bank. To fulfill its responsibilities and mission, JTSB has
established its Ethics Charter and has positioned compliance with laws and social norms as one of its mostimportant management issues. JTSB works to heighten the awareness of compliance among all management andstaff with the aim of conducting corporate activities that are reliable and fair and will win the trust of its customers
naturally, but also from society as a whole.

● JTSB’s Compliance Structure
JTSB has formed its Compliance Department to be in overall charge of compliance matters. Its responsibilities
include formulating compliance programs to promote the implementation of compliance matters, prepare related
rules and regulations, formulate other measures for promoting compliance, making all personnel aware ofcompliance, providing guidance, and achieving overall progress toward compliance objectives. In addition,compliance officers have been appointed in JTSB’s each department, and these officers serve the functions of
ensuring that all departments are conducting their activities in compliance with laws and regulations andconfirming the status of compliance. The Compliance Department and the compliance officers in each department
hold meetings of the Compliance Officers Committee regularly to discuss matters related to promoting complianceand exchange information.

● Making All Personnel Aware of ComplianceTo ensure appropriate compliance with laws and regulations, each and every member of the management andstaff of JTSB must be aware of compliance at all times and practice compliance. To this end, JTSB has preparedand made all management and staff aware of its Compliance Manual, which contains a code of conduct for use in
the daily conduct of operations and information on relevant laws and regulations. In addition, all management andstaff are required to attend training courses on compliance periodically.

● Compliance Hotline System
JTSB has made arrangements that make it possible for employees to report compliance violations or theirconcerns about possible violations promptly, fairly, and properly directly to either internal or external compliancelistening desks. When such reports are received, the Compliance Department investigates the matter immediately
and takes action as necessary.

<Diagram of the JTSB Compliance Structure>

Board of Directors
Provide advice, reports, etc.,
regarding the legal compliancesystem to the Board of
Directors and others

Compliance Department

Compliance Officers Committee

Reports, etc., regarding
educational and training
activities related to legal
compliance

Compliance officer personnel invarious departments

65

Internal Management Systems[Crisis Management Systems (Business Continuity Plans)]
In the event of a disaster or system failure with a significant impact on business operations, we shall strive tominimize the damage through speedy initial response, and secure early and smooth business continuity and recovery.
A business continuity plan is established by the Crisis Management Committee in times of normality, and newissues are addressed through regular drills on disaster response.

Preparation of disastercountermeasure plans

 Revision of internal regulations andbusiness continuity plans Improvements in systems
infrastructure Implementation of disastercountermeasure drills and training Verifying status of addressing
issues identified previously

Assessment of disastercountermeasure drills and training● Facilities (Installations and Equipment)
Our Head Office is located in the Harumi Island Triton Square complex and is designed to withstand magnitude
7 (Japanese scale) earth tremors, such as the 2011 Great East Japan Earthquake. The building is also outfittedwith electric power, telecommunications, security, and other functions. Further, as a financial institution JTSB has
enhanced its facilities in line with the standards issued by The Center for Financial Industry Information Systems(FISC), including a dedicated electric power generator to secure a power supply, telecommunications lines from multiple
carriers to avoid communication breakdowns, and an IC card system to strengthen crime-prevention measures.
In addition, our systems centers and backup sites have a similarly strong infrastructure, including antiearthquake construction, electric power sources, and security facilities.

● Backup Systems
JTSB’s offices and system centers have backup facilities in preparation for possible natural disasters or otherdifficulties.
The disaster response offices for the Harumi Head Office have been established in the Fuchu Office (Fuchu
backup office built in December 2002 and renovated in November 2012) and in the Osaka Prefecture (the second
backup office built in April 2017).
In addition, a disaster response system center (backup center) for the Fuchu Office has been relocated to a sitein Osaka Prefecture (built in Chiba in October 2003, and relocated to Osaka in October 2016).
If the Harumi Head Office is affected by a disaster, operations will be continued at the Fuchu backup office, andat temporary counters (delivery counters of securities companies and other customers). Certain priority operations(settlements, etc.) will be input by staff at the Fuchu center until staff from Harumi can arrive.
If the Fuchu center is affected by a disaster, the system environment will be transferred and operations
continued at the backup center (Osaka Prefecture).
At the time of a wide-area disaster in the Tokyo metropolitan area, our offices will be moved to the second
backup office (Osaka Prefecture) for our staff to continue some of the priority work (settlement of funds, etc.). In
addition, we have established a dual office in the same office to handle Bank of Japan settlement and otheroperations in times of normality.

6

● Practice Drills for Disaster Countermeasures
Following systematic disaster countermeasure plans, post-disaster practice drills are conducted at the backup
sites as well as drills with the participation of outside organizations to verify the workability of business continuity
plans prepared by various departments. These repeated practice drills enable all staff to make preparations to act
smoothly during times of disaster.

Fuchu

Main center

Osaka• System switchover

Backup office

Backup center
Backup office• System switchover• Personnel transfer

Approximately
30 km’s distance

HarumiResona Bank
Sumitomo Mitsui Trust Bank• Personnel transfer

Main officeTemporary center
activated

67Internal Management Systems[Internal Auditing Systems]
The internal audit independently verifies the appropriateness and effectiveness of internal management systems,
including those related to compliance and risk management. The objective of this verification is to strengtheninternal management systems, improve business operations, enhance efficiency and rationalize management
through providing advice and suggestions based on the results of the verification.
JTSB prepared its “Internal Auditing Policy” that sets forth internal auditing policies, the position of the internal
audit unit within the organization, and other basic matters. The Internet Audit Department was formed as anorganizational unit that is independent from the operating departments. The department gains an understanding of
the operations of the departments subject to internal auditing and the types of risks inherent in their activities andassesses these risks. This department then prepares audit plans, giving attention to the frequency and depth of
the audits and then works to conduct efficient and effective audits.
Depending on the objectives of the internal audits, such audits are divided into two types—General Audits thatexamine matters related to the businesses of the audited departments and Theme Audits that focus on specified
themes. Results of these audits are reported promptly to the directors and corporate auditors, and reports are
made periodically to the Executive Committee and Board of Directors.

Board ofDirectors

Placing plans on the agenda,
reporting on results

Board of Auditors
Auditors

Executive
Committee
Reporting on
results

Variousdepartments,
including risk
management
units• Verification of
appropriateness andeffectiveness of internalmanagement system(including the risk
management systems)• Guidance, advice, andsuggestions

Internal Audit
Department

6

Financial Section

CONTENTS

Financial Data
■ Balance Sheets■ Statements of Income■ Statements of Changes in Net Assets■ Confirmation Statement from Management■ Auditors’ Statement■ Fair Value Information of Securities, Etc.
■ Other Assets Situation■ Asset Classification under the Financial Revitalization Act■ Indicators for Banking Business■ Trust Assets and Liabilities■ Disclosure Based on Pillar 3 of Basel III■ Disclosure Matters concerning Compensation, Etc.

70
71
72
75
76
76
76
76
77
81
83
92

Designated Dispute Resolution Organization
Contracted by JTSB
Disclosure Items under the Ordinance for

93

Enforcement of the Banking Act and other Laws

94

69

Financial Data

Balance Sheets(¥ million)

Accounting item
AssetsCash and due from banks
Cash
Due from banks
Call loans
Receivables under resaleagreements
Receivables under securities
borrowing transactions
Securities
StocksOther securities
Loans and bills discounted
Loans on deeds
Other assets
Prepaid expenses
Accrued income
Cash collateral pledged forfinancial instruments
Other assets
Tangible fixed assets
Buildings
Lease assets
Other tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Prepaid pension expenses
Deferred tax assets
Total assets
Liabilities and net assets
Deposits
Current deposits
Ordinary deposits
Other deposits
Borrowed money from trust
account
Other liabilities
Income taxes payable
Accrued expenses
Lease obligations
Asset retirement obligations
Deposits received
Other liabilities
Provision for bonuses
Provision for retirement benefits
Provision for directors’ retirement
benefits
Total liabilities
Capital stock
Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought
forward
Total shareholders’ equity
Valuation difference on
available- for-sale securities
Total valuation and translation
adjustments
Total net assets
Total liabilities and net assets

As of March 31, 2018

As of March 31, 201913,177,699
0
13,177,698
350,000

10,654,415
410,654,410
60,000─

31,15551,246

─

337
320
17
184,058
184,058
47,034
485
1,906

334
320
14
167,951
167,951
102,115600
6,937

27,20053,432

17,442
1,906
1,068
3
833
22,381
22,3755263
348
13,835,275

41,145
1,945
1,076
1
867
21,972
21,9665290
375
11,040,555

7,840,589
4,489,523
3,343,717
7,349

5,309,477
5,228,507
12,24468,726

5,898,261

5,634,644

36,015
174
1,516
4
131
32,359
1,828
406
555

36,324
334
1,322
2
131
32,284
2,249
433
596

11

2

13,775,840
51,000
8,435
954
7,481

10,981,478
51,000
8,077
1,094
6,982

7,481

6,982

59,43559,077

0

0

0

0

59,435
13,835,275

59,076
11,040,555

7
70

Statements of Income(¥ million)
Accounting item
Ordinary income
Trust fees
Interest income
Interest on loans
Interest and dividends on
securities
Interest on call loans
Interest on receivables
under resale agreements
Interest on receivables
under securities borrowing
transactions
Interest on due from banks
Other interest received
Fees and commissions
Fees and commissions on
domestic and foreignexchanges
Other fees andcommissions
Other income
Other income
Ordinary expenses
Interest expenses
Interest on deposits
Interest on call money
Interest on borrowings
Other interest expenses
Fees and commissions
expensesFees and commissions on
domestic and foreignexchanges
Other fees andcommissions
General and administrative
expenses
Other expenses
Other expenses
Ordinary profit
Extraordinary income (loss)
Loss on disposal of fixed assets
Income before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
Net income

FY2017FY2018(from April 1, 2017 to March 31, 2018)(from April 1, 2018 to March 31, 2019)27,436
20,577
 2,420029,467
21,956
 2,907
─

20

 12

0

1

─

 17

3

0

 2,443
09,208

 2,880010,342

360

355

8,847

9,987

70
70
26,236
78
7
0
0
70

75
75
28,911
51
7
0
0
43

290

315

85

84

204

230

25,86728,541

0
0
1,199
448
448
751
87
182
270
480

3
3
555
46
46
509
190
 26
164
344

71

Financial Data

Statements of Changes in Net Assets(¥ million)

FY2017 (from April 1, 2017 to March 31, 2018)
Valuation andtranslation adjustments

Shareholders’ equity
Retained earnings

Balance at the
beginning of the period

Otherretainedearnings

Valuation
Total
Total
difference
net
Total
valuationonassetsshareholders’andavailableequity
translation
for-saleadjustments
securities

Capital
stock

Legal
retainedearnings

51,000

922

7,190

8,112

59,112

31

189

158

158

158

480

480

480

480

Retainedearnings
brought
forwardTotal
retainedearnings

43

43 59,156

Changes during theperiodCash dividends
Net income
Net changes of items
other thanshareholders’equity

43

43

43

278

Total changes during
the period

-

31

291

322

322

43

43

Balance at the end of
the period

51,000

954

7,481

8,435

59,43500 59,435(¥ million)

FY2018 (from April 1, 2018 to March 31, 2019)
Valuation andtranslation adjustments

Shareholders’ equity
Retained earnings

Valuation
Total
Total
difference
net
Total
valuationonassetsLegal
Total shareholders’andavailableretained Retained retained
equitytranslation
for-saleearnings earnings earnings
adjustments
securities
brought
forwardOther
retainedearnings

Capitalstock

Balance at the beginningof the period

51,000

0

0

954

7,481

8,435

59,43559,435

140

 843

 702

 702

 702

344

344

344

344

Changes during theperiodCash dividends
Net income
Net changes of items
other thanshareholders’equity000Total changes during theperiod

-

140

 498

 357

 357

0

0

 358

Balance at the end of theperiod51,000

1,094

6,982

8,077

59,0770

059,076

Amounts less than ¥1 million are rounded down.

Significant Accounting Policies (FY2018)
1. Standards for evaluation of securities and valuation methods used
In principle, as with available-for-sale securities, securities are valued by the market value method based on the market price or other appropriate price at the balance
sheet date (with the sales price calculated by the moving average method). However, for securities for which it is generally recognized that the determination of fair value
is extremely difficult, JTSB employs the original purchase prices using the moving average method. Note that the full amount of adjustments in the value of available-forsale securities is accounted for by adding such amounts directly to net assets.
2. Depreciation methods(1) Tangible fixed assets (excluding leases)
JTSB calculates depreciation of tangible fixed assets by the declining-balance method, with the exception of buildings (excluding equipment installed in buildings),
and facilities attached to buildings and structures acquired on or after April 1, 2016, which are depreciated by the straight-line method.
Estimated useful lives of major items are as follows:
Buildings: 3 to 43 years
Others: 2 to 20 years(2) Intangible fixed assets (excluding leases)
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortized over its estimated useful life (mainly 5 years).

7
72

(3)

Lease assets
Lease assets for which the ownership does not transfer and are included in tangible fixed assets are depreciated using the straight-line method over theestimated useful life. Note that for those leases that are based on contracts providing for guarantees of residual value the assets are depreciated down to thespecified residual value, and all other assets are depreciated to zero.
3. Standards for translating foreign currency assets and liabilities into yen
Foreign currency assets and liabilities are translated into Japanese yen at the exchange rate prevailing at the balance sheet date.
4. Standards for calculating reserves(1) Provision for bonuses
To provide for the payment of bonuses, JTSB sets aside a reserve for bonuses for employees in the amount of the estimated bonuses attributable to the relevant
fiscal year.
(2) Provision for retirement benefits
To provide for the payment of retirement benefits to employees, JTSB sets aside the reserve necessary at the fiscal year-end to cover such benefits, based on
estimates of its retirement benefit obligations and the expected value of pension plan assets. In addition, in calculating retirement benefit liabilities, the expectedamount of retirement benefit payments through the end of the subject fiscal year is allocated to the fiscal year under the benefit formula standard.
Please note that the method for amortizing expenses or recognizing gains arising due to actuarial differences is as follows.
Actuarial calculation differences: The unrecognized net actuarial difference accrued in each fiscal year is amortized proportionately using the straight-line
method over a specified number of years (5 years), which is within the average remaining years of service in each year when
the obligations are incurred, commencing from the next fiscal year of incurrence.
(3) Provision for directors’ retirement benefits
To provide for the payment of retirement benefits for directors, as provided for in JTSB’s rules for payment of such retirement benefits, the portion of the total ofsuch benefits that have accrued through the end of the fiscal year under review is set aside as a reserve.
5. Accounting for consumption taxes
National and regional consumption taxes (hereinafter, consumption taxes) are accounted for using the net-of-tax method.

Notes to Accounting Items (FY2018)(Balance Sheets)
1. Of the securities received under resale agreements, there are securities that can be freely disposed of using the methods of sale or re-collateralization. Securities thatare pledged to re-collateralization amount to ¥31,092 million.
2. The full amount of loans is outstanding to the government of Japan.
3. Assets pledged as collateral are as follows.
Assets pledged as collateral
Loans and bills discounted¥167,951 million
Liabilities corresponding to collateralized assets
The above is collateral for overdraft transactions with the Bank of Japan, and there is no outstanding balance of correspondi ng liabilities as of the end of fiscal year
under review.
Other assets include guarantee deposits of ¥40,947 million.
4. Overdraft contracts provide for making loans up to a specified limit, provided there are not violations of the provision of contracts, when loan requests are received from
customers. The unexercised balance of loan commitments under these contracts is ¥11,200 million, and contract terms are 1 year or less.
Note that, since typically these contracts terminate without requests for overdrafts, the unexercised balance of loan commitments under these contracts will notnecessarily have an effect on JTSB’s cash flow. In addition, under systems related to these contracts, measures are taken to preserve the related loan assets, including
the securing of repayment resources in the form of securities, cash, and other assets.
5. Accumulated depreciation of tangible fixed assets:¥4,310 million
6. Total monetary claims on affiliates:¥74 million
7. Total monetary obligations outstanding to affiliates:¥305 million
8. JTSB has accepted limitations on dividends of the surplus as prescribed by Article 18 of the Banking Act.
Notwithstanding the provision of Article 445 (4) (Amounts of Stated Capital and Amounts of Reserves) of the Companies Act, in the case where JTSB pays dividends
from the surplus, it records an amount equivalent to one- fifth of the amount of the deduction from the surplus as a result of the payment of such dividends of the surplus,
as legal retained earnings.
In the subject fiscal year, JTSB recorded ¥140 million in legal retained earnings in relation to dividends from the surplus.

(Statements of Income)1. The negative figure for interest on due from banks is due to the fact that as a consequence of the application of negative interest rates to Bank of Japan current deposits,
interest on deposits with the Bank of Japan became negative on a net amount basis.
2. Income related to transactions with affiliates
Total income from trust transactions:¥2,419 million
Total income from fees and commissions:¥259 million
Total income from other businesses and other ordinary transactions:¥6 million
Expenses related to transactions with affiliate
Total expenses related to other businesses and other ordinary transactions: ¥188 million(Statements of Changes in Net Assets)
1. Types of shares issued and number
Total number outstanding at
the beginning of the period
Common stock
1,020
Note: None applied to treasury stock.

(Thousand shares)
Increase during theperiod-Decrease during theperiod-Balance at the end of theperiod1,020

Remarks

2. Dividends(1) Dividends paid during the fiscal year
Date of decision
Taken on June 29, 2018 based on
Article 319-1 of the Companies Act
Taken on September 27, 2018 basedon Article 319-1 of the Companies Act

Type of shares

Total dividends

Dividends per share

Record date

Effective dateCommon stock¥193 million¥190

March 31, 2018

June 29, 2018

Common stock¥508 million

¥499

-

September 28, 2018

(2) Dividends with a record date during the fiscal year, but whose effective date is after March 31, 2019
None

73

Financial Data

(Tax Effect Accounting Items)
The breakdown of factors accounting for the accrual of deferred tax assets and liabilities is as follows.
Deferred tax assets
Provision for retirement benefits¥182 million
Provision for bonuses
132Enterprise tax payable
64
Asset retirement obligations
40
Depreciation denied
30
Others101
Subtotal of deferred tax assets
551
Valuation allowance 63
Total deferred tax assets
488
Deferred tax liabilities
Prepaid pension expenses
89
Others23
Total deferred tax liabilities
112
Net deferred tax assets¥375 million(Financial Instruments)
1. Matters related to the status of financial instruments(1) Policy on financial instruments
JTSB, as a trust bank specializing in the asset administration business, raises funds through borrowed money from trust account, which generates cash on acontinuing basis.
In its fund management activities, JTSB invests in Japanese government bonds (JGBs), receivables under resale agreements (eligible bonds for this type oftransactions are JGBs, the same applies below) and loans to the Japanese government. The aim is to secure collateral to be pledged to its settlement system tofacilitate the smooth flow of settlement operations. Also, if there are idle funds, these are used for deposits in the Bank of Japan or other institutions, call loans,receivables under resale agreements, and loans to the Japanese government and JGBs. These fund management activities are not conducted to obtain capitalgains, but, in principle, funds are invested in instruments with a remaining period to maturity of one year or less. Notwithstanding this, when permission to carry out
collateral-holding operations is received from the Board of Directors, these funds are invested, within the scope of our asset-liability management (ALM) plans, in
JGBs with maturities from more than one year to three years.
(2) Types of contents and risks associated with financial instruments
JTSB’s financial assets, in addition to deposits in the Bank of Japan and other institutions, comprise loans to the Japanese government, call loans, andreceivables under resale agreements. As stated in the policy above, market risk is limited by confining operations within one year as a general rule. JTSB’s policy
for making call loans and receivables under resale agreements is to restrain the size and content of such loans to a necessary minimum with the aim of minimizing
credit risk.
On the other hand, JTSB’s financial liabilities are primarily borrowed money from trust accounts and deposits. The balance of such liabilities is stable, and
JTSB avoids liquidity risk by limiting its asset administration operations to highly liquid financial instruments.
(3) Risk management relating to financial instruments(i) Credit risk management
JTSB’s principal credit risks arise in the management of idle funds generated by its asset administration business. JTSB has established a “Credit Risk
Management Policy,” which calls for restraint in the size and content of such investments. Moreover, the Corporate Risk Management Department sets various
credit risk position limits based on the “Credit Risk Management Regulations,,” and monitors the observance of these limits on a daily basis.
(ii) Market risk management
JTSB has established a “Market Risk Management Policy,” which calls for strict limitation of market risk, and, based on this policy, aims for safe and securemanagement. In addition, the Corporate Risk Management Department set various market risk position limits based on the “Credi t Risk Management
Regulations,” and monitors the observance of these limits on a daily basis.
JTSB’s market risks arise mainly from the effects of interest rate risk, and the major financial instruments subject to this risk are loans to the Japanese
government, call loans, and receivables under resale agreements. To manage the risk of these financial instruments, JTSB employs the Basis Point Value(BPV) method (which measures the change in the value of these assets for each one basis point (0.01%) movement in interest rates) to conduct quantitative
analysis and the management of interest rate risk. As of March 31, 2019, analyses based on the BPV method indicate that the i nterest rate risk for a one basis
point movement in interest rates is ¥5 million. Please note that this movement in asset prices assumes that risk factors, excluding interest rate risk, remainunchanged, and does not take account of correlations between interest rates and other risk causal factors.
(iii) Liquidity risk management
JTSB manages the idle cash generated by its asset administration business on a continuing basis and limits the choice of investment instruments to thosewith high liquidity as provided for in its “Liquidity Management Policy.” Accordingly, the level of liquidity risk is basically believed to be low; however, theCorporate Risk Management Department sets liquidity risk position limits based on its “Liquidity Risk Management Regulations” and monitors the observanceof these limits on a daily basis.
(4) Supplementary explanation of fair value of financial instruments
The fair value of financial instruments is based on the market price of such instruments, but, when market prices are not available, prices based on reasonableestimates are reported. Since these estimates involve certain assumptions, in cases where assumptions are subject to change, the value of assets may alsochange.
2. Fair values of financial instruments
The differences between the carrying amounts on the balance sheets and fair values, as of March 31, 2019, are shown below. Those assets for which fair value isrecognized to be extremely difficult to determine are not included (refer to Note 2).
(¥ million)(1) Cash and due from banks(2) Call loans(3) Receivables under resale agreements(4) Loans and bills discounted
Total assets(1) Deposits(2) Borrowed money from trust accountTotal liabilities

Balance sheet
amount10,654,415
60,00031,155167,951
10,913,521
5,309,477
5,634,644
10,944,122

Fair value

Difference

10,654,415
60,00031,155167,951
10,913,521
5,309,477
5,634,644
10,944,122-

Note 1: Calculation method of the fair value of financial instruments
Assets(1) Cash and due from banks
Since due from banks comprises only deposits with banks without maturity dates and since the fair value closely approximates the book value, the book value
concerned is recorded as the fair value.
(2) Call loan and (3) Receivables under resale agreements
Since the contractual terms of these instruments are short (one year or less), and the fair value closely approximates the book value, the book value concerned isrecorded as the fair value.
(4) Loans and bills discounted
Since loans are short-term (one year or less) loans to the Japanese government, the fair value closely approximates the book value and the book value
conserned is recorded as the fair value.

774

Liabilities(1) Deposits
Since all deposits are demand deposits, the amount that may be demanded on the date of the closing of accounts (book value) is regarded to be the fair value.
(2) Borrowed money from trust accountSince borrowed money from trust account is equivalent to demand deposits, the amount that may be demanded on the date of the closing of accounts (bookvalue) is regarded to be the fair value.
Note 2: The balance sheet amounts of financial instruments where it is recognized as being extremely difficult to grasp their respective fair values are as follows, andthey are not included in “Assets” in the fair value information of financial instruments.
(¥ million)
Category
Balance sheet amountUnlisted stocks
320
Unlisted foreign securities
14
Total
334
* Because of the absence of market value quotes for these securities, their fair value is difficult to determine, and their fair value is not disclosed.
Note 3: Redemption schedule of monetary claims and securities with maturity dates after March 31, 2019
Over one year toOver three years to Over five years to Over seven years to
One year or lessthree years or lessfive years or lessseven years or lessten years or lessDue from banks
10,654,410
Call loans
60,000Receivables under resale agreements
31,155Loans and bills discounted
167,951
Total
10,913,517
Note 4: Repayment schedule of deposits and interest-bearing debt (liabilities) after March 31, 2019
Over one year toOver three years to Over five years to Over seven years to
One year or lessthree years or lessfive years or lessseven years or lessten years or less
Deposits
5,309,477
Borrowed money from trust account5,634,644
Total
10,944,122* Demand deposits and borrowed money from trust account, which are equivalent to demand deposits, are included in the “1 year or less” category.
Deposits include balances of current deposits.

(¥ million)
Over ten years(¥ million)
Over ten years-(Transactions with Related Parties)(1) Parent company and major corporate shareholders
Percentage
Type of company
Name of company
ownership

Relationship with related
partyType of transactions

Amount oftransactions

Accounting item(¥ million)
Balance at endof period
172

Accrued income
Deposits
6,221
received
As Resona Bank, Limited. ceased to be a related party during the fiscal year under review, the amount of transactions is recorded as the amount duri ng the period that
Resona Bank was a related party, and the ratio of voting rights held and the fiscal year-end balance are recorded as at the end of the period.
The terms of transactions and method of determination are as follows:
Fees for re-entrustment and other fees that are based on cost are decided through negotiations.
“Amount of transactions” dose not include consumption taxes. “Balance at end of period” include consumption taxes.
(2) Subsidiaries and affiliates, etc.
None(3) Other companies with indirect capital affiliation(¥ million)
Percentage
Relationship with related
Amount ofBalance at end
Type of company
Name of company
Type of transactions
Accounting item
ownership
partytransactionsof period
Release of call funds
290,000
Call loans
290,000(*1)
Monetary assets andSubsidiary of theSumitomo Mitsui—
liabilities/ Entrusts asset
Accrued income
1,572
parent company
Trust Bank, Limited
Re-entrustment fees,
administration to JTSB
11,486
Deposits
receipt of fees (*2)
20,225received
As Sumitomo Mitsui Trust Bank, Limited. ceased to be a related party during the fiscal year under review, the above amount of transactions is recorded as the amountduring the period that SMTB was a related party, and the fiscal year-end balance is recorded as at the end of the period.
The terms of transactions and method of determination are as follows:*1: Interest rates on call loans are set with reference to prevailing market rates.
Since call loans are short-term market transactions, the out- standing balance of such loans as of March 31, 2016 is shown in the “Amount of transactions”
column.
*2: Fees for re-entrustment and other fees that are based on cost are decided through negotiations.
“Amount of transactions” dose not include consumption taxes. “Balance at end of period” includes consumption taxes.
(4) Directors and other individual shareholders
None
Other affiliatedcompany

Resona Bank,
Limited

Percentage owned: Entrusts asset
33.3%
administration to JTSB

Re-entrustment fees,
receipt of fees

2,679(Per share information)
Net assets per share of common stock:
Net income per share of common stock:¥57,918.56¥338.16

Confirmation Statement from Management
I have confirmed that the financial statements (balance sheets, statements of income, andstatements of changes in net assets) for the 19th term, covering the period from April 1,2018 to March 31, 2019, are presented appropriately and that the internal auditing related
to the preparation of these financial statements functioned effectively.
June 26, 2019

Yoshikazu Tanaka,
Representative Director and President

75

Financial Data

Auditors’ Statement
The Company has been audited by and received the Audit Report from an independentaccounting firm, KPMG AZSA LLC, pursuant to Paragraph 1, Article 396 of the Companies
Act, indicating that all material items in the financial statements pertaining to assets andincome for FY2018 have been presented appropriately.

Fair Value Information of Securities, Etc.
 Available-for-sale securities with fair value
March 31, 2018

None

March 31, 2019None

 Available-for-sale securities where it is extremely difficult to determine their fair value(¥ million)

As of March 31, 2018

As of March 31, 2019

Balance sheet amount

Balance sheet amountUnlisted stocks

320

Unlisted foreign securities

17

320
14

Total

337

334

 Fair Value, etc. of money trusts and derivative transactions
None

Other Asset Situation
 Risk-monitored loans (loans to bankrupt borrowers, delinquent loans, loans past due for3 months or more, and restructured loans)
None Fiscal year-end balance of allowance for loan losses and changes during the periodNone Write-off amount of loans and bills discounted
None

Asset Classification under the Financial Revitalization Act(¥ million)

Claim Category

As of March 31, 2018

As of March 31, 2019

Bankruptcy or reorganization claim or otherequivalent claims――

Doubtful claims――

Substandard claims――

Normal claims

184,058

167,951

Total

184,058

167,951

7
76

Indicators for Banking Business(1) Key business indicators(¥ million)

FY2017
Domestic
Gross business profits

FY2018International

Total

Domestic

International

Total

26,99629,0240

29,024

0.21%

0.23%

2.33%

0.23%

 2,499

 2,958

0 2,958

29,49531,983031,983

-

-

-

-

-

-

-

-

-

-

26,9950Gross business profit margin

0.21%

3.47%

Net interest income

 2,499

0

Net fees and commissions(including trust fees)

29,4940

Net trading income-

Other net operating income-

Notes 1: Gross business profit margin = Gross business profit / Average balance of interest-earning assets × 100
2. The negative figure for the interest income on due from banks is due to the fact that as a consequence of theapplication of negative interest rates to Bank of Japan current deposits, interest on due from banks became
negative on a net amount basis.
(¥ million)

FY2017
Domestic
Average balance ofinterest-earning assets

12,560,989

 2,420

Interest rate spread
Notes:

Domestic

International

Total

(16)
17

12,560,989

12,201,043

17

16

12,201,043(16)
12,539,178(0)Interest on interestbearing liabilities

Average yield on interestbearing liabilities

Total

(17)
12,539,178

Average yield on interest
earning assets

International(17)

Average balance ofinterest-bearing liabilities

Interest on interestearning assets

FY201812,190,298

16

12,190,298-

 2,907(0)- 2,420

 2,907

(0)

(0)

78

0

78

51

0

51

 0.01%-

 0.01%

 0.02%-

 0.02%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

 0.01%

 0.00% 0.01%

 0.02%

 0.00% 0.02%

1. “Interest-earning assets” are shown after deducting the average balance of noninterest earning due frombanks (¥135 million in FY2017, ¥155 million in FY2018).
2. The figure in parentheses is the average balance of funds and interest between the domestic businessdivision and the international business division.
3. Negative figures for the interest on interest-earning assets and average yield on interest earning assets are
due to the fact that as a consequence of the application of negative interest rates to Bank of Japan current
deposits, interest on due from banks became negative on a net amount basis.

 Analysis of change in interest earned (paid)(¥ million)

FY2017
Domestic

Total

Domestic

International

Total

-

 256

 487

-

 487

 170

-

 170

69

-

69

 86

-

 86

 556

-

 556

Net change in interest paid
Changes due tobalance

35

0

35

 27

0

 27

3

-

3

2

0

2

Changes due tointerest rate

32

0

32

 25

-

 25

Net changes in interest
earned 256

Changes due tobalance
Changes due tointerest rate

International

FY2018

Note: The part where factors for an increase/decrease in the balance and interest rate overlaps is included in the latter.

77

Financial Data

 Return rate(%)

FY2017FY2018Return on Assets

0.00

0.00

Return on Equity

2.02

0.93

Net Return on Assets

0.00

0.00

Net Return on Equity

0.80

0.58

Notes: 1. Return on assets (net) = Ordinary (net) profit / Average balance of assets × 100
2. Return on equity (net) = Ordinary (net) profit / Average balance of equity × 100(2) Indicators on deposits
 Average balance by deposit(¥ million)

FY2017FY2018Domestic

International

Total

Domestic

Current deposits

6,005,377-

6,005,377

5,152,000-

5,152,000

Ordinary deposits

791,012-

791,012718,296-718,296

Other deposits

6,697

-

6,697

7,562

-

7,562

6,803,087-

6,803,087

5,877,860-

5,877,860

Total

International

Total

Note: There is no balance of deposit other than the above.

(3) Indicators for loans and bills discounted
 Average balance by loan and bill discounted(¥ million)

FY2017
Domestic

Total

Domestic

Bills discounted

-

-

-

-

-

Loans on bills

-

-

-

-

-

-

138,929-

138,929

172,940-

172,940

-

-

-

-

-

-

138,929-

138,929

172,940-

172,940

Loans on deeds
Overdraft
Total

International

FY2018International

Total
-

 Balance of loans and bills discounted by average life(¥ million)

1 year or less

As of March 31, 2018

As of March 31, 2019

184,058

167,951

Floating interest rate――

Fixed interest rate

184,058

167,951

184,058

167,951

Total
Floating interest rate――

Fixed interest rate

184,058

167,951778

 Breakdown by collateral for loans and bills discounted(¥ million)

As of March 31, 2018

As of March 31, 2019

Securities――

Claims――

Products――

Real estate――

Guarantee――

Credit184,058

167,951

Total

184,058

167,951

As of March 31, 2018

As of March 31, 2019

 Balance of acceptances and guarantees
None Balance by purpose of loans and bills discounted(¥ million)

Equipment funds――

Working capital

184,058

167,951

Total

184,058

167,951

 Balance by industry of loans and bills discounted(¥ million)

As of March 31, 2018

As of March 31, 2019

BalanceComposition
ratio

BalanceComposition
ratio

Government of Japan

184,058

100.0%

167,951

100.0%

Total

184,058

100.0%

167,951

100.0%

 Balance of loans and bills discounted for SME
None Balance of specific foreign loans
None Loan-deposit ratio(%)

FY2017FY2018Domestic

International

Total

Domestic

International

Total

End of period

2.34

-

2.34

3.16

-

3.16

Average for the period

2.04

-

2.04

2.94

-

2.94

Note: Loan-deposit ratio = Loans and bills discounted / (Deposits + Negotiable certificates of deposit) × 100

79

Financial Data

(4) Indicators for securities
 Average balance of trading securities
Our Company does not own trading securities.
 Balance of securities by average life(¥ million)

As of March 31, 2018

As of March 31, 2019

Government bonds (1 year or less)――Government bonds (over 1 year to 3 years or less)――Government bonds (over 3 years to 5 years or less)――

Stocks (without the limitation of period)

320

320

Other securities

17

14

Foreign stocks (without the limitation of period)
Total

17

14

337

334

Note: None applied to regional government bonds, corporate bonds, and foreign bonds.

 Average balance of securities(¥ million)

FY2017
Government bonds
StocksDomestic

International

Total

Domestic

International

Total

27,616-

27,616

20,962-

20,962

320

-

320

320

-

320

-

17

17

-

16

16

17

17

17

27,953

Other securities
Foreign stocks
Total

FY201827,936

21,28216

16

16

21,299Note: None applied to regional government bonds, corporate bonds, and foreign bonds.

 Security-deposit ratio(¥ million)

FY2017
Domestic International

FY2018Total

Domestic

End of period

0.00

-

0.00

0.00

International
-

Total
0.00

Average for the period

0.41

-

0.41

0.36

-

0.36

Note: Security-deposit ratio = Securities / (Deposits + Negotiable certificates of deposit) × 100

880

Trust Assets and Liabilities(1) Balance Table of Assets in Trust(¥ million)

As of March 31, 2018

As of March 31, 2019

(Assets)――

109,179,760

116,317,170

11,579,310

10,575,060

Regional government bonds

636,521597,957

Short-term bonds

740,764

481,919

Corporate bonds

2,513,857

2,497,593

Stocks

68,820,070

75,037,723

Foreign securities

19,766,102

21,415,777

Other securities

5,123,133

5,711,137

Securities in investment trusts

49,134,666

53,645,197

Foreign securities in investment trusts

26,155,659

24,946,114

Trust beneficiary rights

45,938,205

46,033,209

Trust securities

19,381,647

19,890,971

Monetary claims

9,449,313

4,862,896

Housing loan claims

3,482,636

3,471,868

Other monetary claims

5,966,677

1,391,027

Tangible fixed assets

192

192

Real estate

192

192

Other claims

1,572,719

6,750,341

Call loans

4,388,669

3,821,510

Loans to banking account5,898,261

5,634,644

Cash and due from banks

10,975,345

9,996,315

Due from banks

10,975,345

9,996,315

282,074,441

291,898,563

Money in trust

4,243,619

4,018,433

Monetary trusts other than money in trust

2,114,723

2,149,812

Monetary claims in trust

3,482,636

3,471,868

272,233,462

282,258,448

282,074,441

291,898,563

Loans and bills discounted
Securities
Government bonds

Total(Liabilities)

Composite trusts
Total
Notes:

1. Amounts less than ¥1 million are rounded down.
2. Joint trusts and trusts administered by others: ¥— million
3. Figures do not include any trusts with principal-guaranteed features.

(2) Status of acceptance for money trusts, etc.
 Fiscal year-end balance of trust(¥ million)

Money in trust

As of March 31, 2018

As of March 31, 2019

4,243,619

4,018,433

Money trusts, etc. shall refer to money trusts, annuity trusts, employees' property formation benefit trust,and loan trusts; however, there is no transaction balance for annuity trusts, employees' property formation
benefit trust, and loan trusts.

81

Financial Data Balance of principal by trust period(¥ million)

Money in trust

As of March 31, 2018

As of March 31, 2019

Less than 1 year

374,100

257,600

1+ years to less than 2 years

3,810,668

3,714,062

2+ years to less than 5 years――

5+ years
Total

1,200

14,1644,185,968

3,985,827(3) Status of investment for money trusts, etc.
 Investment balance(¥ million)

Money in trust

As of March 31, 2018

As of March 31, 2019――

Securities

3,763,673

3,543,302

Total

3,763,673

3,543,302

Loans and bills discounted

 Fiscal year-end balance of securities by type(¥ million)

Money in trust
Government bonds

As of March 31, 2018

As of March 31, 2019575,313324,290

Regional government bonds

29,212

17,352

Corporate bonds

288,879

268,780

Stocks

2,083,194

1,909,710

Foreign securities

622,607607,979

Other securities

164,464

415,189

3,763,673

3,543,302

Total(4) Status of trusts with principal-guaranteed features
There is no transaction balance for trusts with principal-guaranteed features.
■ Breakdown of Trust Assets by Type of Original Trust Agreement (in last 2 years)

Monetaryclaims in trust

Securities
in trust

Monetary
trusts otherthan money intrust

Composite
trust

Money intrust

Monetaryclaims in trust
Annuitytrust

End ofMarch
2018
Investment
trust

Securities intrust

Monetary
trusts otherthan moneyin trust

Composite
trust

Money intrust

Annuity trust

End ofMarch
2019
Investment
trust

Note: The above table shows a percentage of total trust assets with the addition of direct trusts, after recording thefollowing re-trusts received by the type of original trust agreement.
As of March 31, 2018, of ¥272 trillion in "composite trust" recorded in the Balance Table of Assets in Trust,¥239 trillion was re-trusted.
As of March 31, 2019, of ¥282 trillion in "composite trust" recorded in the Balance Table of Assets in Trust,¥248 trillion was re-trusted.

882

Disclosure Based on Pillar 3 of Basel III● Composition of Capital Disclosure
Based on Article 14-2 of the Banking Act, the Company calculates its capital ratio as the basis
for making judgments regarding the adequacy of its capital in light of its holdings of assets
according to the formula for domestic banks (Financial Services Agency Notification No. 19 of
2006). Based on the matters separately specified by the Commissioner of the Financial Services
Agency regarding the adequacy of equity capital, etc. (Financial Services Agency Notification No. 7
of 2014), we use Appendix No. 11 of the Financial Services Agency Notification No. 7 fordisclosure at the end of period under review and Appendix No. 3 of the Supplementary Provisionsof the same Notification for disclosure at the end of previous period.
Regarding disclosure matters of capital, credit risk assets are calculated according to theStandardized Approach. The amount of operational risk equivalents is calculated using theAdvanced Measurement Approach as of the end of March 2018, and the Basic Indicator Approachas of the end of March 2019.

 Non-consolidated capital adequacy ratio
Basel III (Financial Services Agency Notification No. 7 of 2014)
As of March 31, 2019(¥ million)

Items
Core Capital: Instruments and reserves (1)Directly issued qualifying common shares or preferred shares
mandatorily convertible into common shares capital plus related
capital surplus and retained earnings
Of which, capital and capital surplus
Of which, retained earnings
Of which, treasury stock (-)
Of which, planned distribution of income (-)
Of which, other than above
Subscription rights to acquire common shares or preferred shares
mandatorily convertible into common shares
Reserves included in Core Capital: Instruments and reserves
Of which, general reserve for possible loan losses
Of which, eligible provisions
Eligible non-cumulative perpetual preferred shares subject totransitional arrangements included in Core Capital
Eligible capital instruments subject to transitional arrangements
included in Core Capital
Capital instruments issued through the measures for strengthening
capital by public institutions included in Core Capital
Amount equivalent to 45% of land revaluation excess subject totransitional arrangements included in Core CapitalCore Capital: Instruments and reserves(A)Core Capital: Regulatory adjustments (2)Total intangible fixed assets (excluding those relating to mortgage
servicing rights)
Of which, goodwill (including those equivalent)
Of which, other than goodwill and mortgage servicing rights
Deferred tax assets (excluding those arising from temporary
differences)
Shortfall of eligible provisions to expected losses
Capital increase due to securitization transactions
Gains and losses due to changes in own credit risk on fair valued
liabilities
Prepaid pension costs
Investments in own shares (excluding those reported in the Net
Assets)Reciprocal cross-holdings in capital instruments issued by otherfinancial institutions for raising capital that are held by the Bank
Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation
Amount exceeding the 10% threshold on specified items
Of which, significant investments in the common stock of otherfinancial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary
differences

Amounts
Amounts
As of March excluded under As of March excluded undertransitionaltransitional
31, 2018
31, 2019
arrangements
arrangements

59,241

59,07751,000
8,435
─
193
─

51,000
8,077
─
─
─

─

─

─
─
─

─
─
─

─

─

─

─

─

─

─

─

59,241

59,077

12,422

3,105

15,244

─

12,422

3,105

15,244

─

─

─

─

─

─
─

─
─

─
─

─
─

─

─

─

─

146

36

201

─

─

─

─

─

─

─

─

─

─
2,343

─
585

─

─

2,828

─

─

─

─

─

─

─

─

─

2,828

─

2,343

585

83

Financial Data(¥ million)
Amounts

Amounts

Items

As of March excluded under As of March excluded undertransitionaltransitional
31, 2018
31, 2019
arrangements

arrangements

Amount exceeding the 15% threshold on specified items
Of which, significant investments in the common stock of otherfinancial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences
Core Capital: Regulatory adjustments(B)
Capital
Total amount of capital ((C)=(A)–(B))
Risk-weighted assets (3)Credit risk assets
Of which, total of items included in risk-weighted assets subject
to transitional arrangements
Of which, intangible fixed assets (excluding goodwill andmortgage servicing rights)
Of which, deferred tax assets
Of which, prepaid pension costs
Of which, exposure to other financial institutions
Of which, other than above
Amount equivalent to market risk divided by 8%
Amount equivalent to operational risk divided by 8%
Credit risk-weighted assets adjustments
Amount equivalent to operational risk adjustments
Total risk-weighted assets(D)
Capital Adequacy Ratio
Capital Adequacy Ratio (C)/(D)

─

─

─

─

─

─

─

─

─
─
14,912────
18,274──

44,32840,802

92,82458,465

3,728

─

3,105

─

585
36
─
─
─
46,980──
139,804─────
53,193
──
111,659

31.70%

36.54%

884

● Qualitative Disclosure(1) Main features of regulatory capital instruments
Our Company is rased by common stocks. For the balance, please refer to"Financial Section, Corporate Data, and Shareholder Status."(2) Assessment of capital adequacy under pillar2
Our Company assesses the capital adequacy by calculating the surplus of capital
buffer for quantity of various risk types. Quantity of various risk types, capital andexcess of capital buffers shall be as follows.
(¥ million)

Quantity of various risk types, capital and excess of capital buffers(i) Credit risk(ii) Interest rate risk

As of March 31, 2018

As of March 31, 2019

7,425

4,677

114

467

(iii) Operational risk

3,758

4,255

(iv) Capital

44,32840,802(v) Excess of capital buffers (v) = (iv) − (i) − (ii) − (iii)

33,031

31,403(Reference) Capital adequacy ratio

31.70%

36.54%

Notes: (i)
(ii)

(iii)

Credit risk is calculated by multiplying 8% by the amount of credit risk assets obtained based on the “Standardized
Approach.”Interest rate risk: As of the end of March 2018, measured by the "Sensitivities-based method*." As of the end of March
2019, ⊿EVE for interest rate risk in the banking book.
* Interest rate scenario: A rate shock at the 1st and 99th percentile of observed interest rate changes using a 1-year
holding period and a minimum of 5 years of observation
Operational risk: Operational risk equivalents calculated by the "Advanced Measurement Approach" at the end of
March 2018 and the "Basic Indicator Approach" at the end of March 2019(3) Credit risk
 Risk management policy and outline of procedures
Our credit risks arise mainly in the management of surplus funds generated by theasset administration business. JTSB has established a “Credit Risk Management
Policy,” which calls for restraint in the size and content of such investments.
The Corporate Risk Management Department, as a responsible department,
sets various credit risk limits, monitors compliance with these limits daily, andreports the credit risk status to the Executive Committee every quarter.
 Portfolios to which the Standardized Approach is applied• Names of qualified rating agencies used for determining risk weights
Our Company uses the following five qualified rating agencies to determine risk
weights.
• JCR
• R&I
• Moody’s• S&P• Fitch Ratings• Names of qualified rating agencies used for determining risk weights for eachtype of exposure Our Company uses the above five qualified rating agencies todetermine risk weights in call loan transactions.
(4) Risk management policy and summary of procedures concerning credit risk
mitigation techniques
Our Company stipulates in the "Procedures for Calculation of Capital Adequacy
Ratio" that the Standardized Approach is to be applied, in part, to a simplified
approach as the risk mitigation approach for eligible financial collateral (credit risk
related).
(5) Risk management policy for the risks of counterparties of derivatives transactions
and long-settlement transactions and outline of procedures
None(6) Securitization exposure
None(7) Market riskNone(8) Operational risk

85

Financial Data

 Risk management policy and outline of procedures
Based on the risk profile as a trust bank specializing in asset administration, ourCompany is considered to have a high proportion of operational risk in its overallrisks. For this reason, we have established a solid internal control system toprevent such risks and minimize their impact on business when they materialize.
This basic policy is stipulated in the "Operational Risk Management Policy."
In order to appropriately manage operational risk in accordance with the above
policy, our Company has established the "Operational Risk Management
Regulations," stipulating that risk management departments shall carry out risk
management activities for each risk subcategory described below (Processing Risk,
Information Security Risk, System Risk, Legal and Compliance Risk, Event Risk,
Personnel Risk, and Reputational Risk), and that the Corporate Risk Management
Department shall establish a management system for planning, promoting, andcoordinating all aspects of operational risk management, as a department thatcomprehensively manages operational risks.
A) Risk management departments and activities for each risk subcategory are as follows.
(i) Processing risk
• The Operations Planning Department is responsible for processing risks toplan and promote the management of processing risk.
• Activities related to processing risk management conform to the"Processing Risk Management Rules" in charge of the Operations
Planning Department.
(ii) Information security risk
• Among information security risks, the Operations Planning Department isin charge of information management-related risks, and the IT
Management Department is in charge of information system-related risks.
They plan and promote the management of each risk.
• Activities related to information management conform to the "Information
Security Risk Management Regulations" administered by the Operations
Planning Department, and activities related to information systems
conform to the "System Risk Management Regulations" administered by
the IT Management Department.
(iii) System risk
• The IT Management Department is responsible for system risks to planand promote the management of system risks.
• Activities related to system risk conform to the "System Risk Management
Regulations" administered by the IT Management Department.
(iv) Legal & compliance risk
• The Compliance Department is responsible for legal and compliance risks
to plan and promote legal and compliance risk management.
• Legal and compliance risk management activities conform to the“Compliance Risk Management Regulations” administered by theCompliance Department.
(v) Event risk
• The Corporate Administration Department is responsible for event risks
and serves as the secretariat of the Crisis Management Committee.
• Event risk management activities conform to the "Crisis Management
Regulations" administered by the Corporate Risk Management
Department and the "Business Continuity Management Regulations"administered by the Corporate Administration Department. In addition todeveloping a business continuity structure, disaster-prevention andsecurity measures are planned and promoted.

886

(vi) Personnel risk
• The Human Resources Department is responsible for personnel risks toplan and promote personnel risk management.
• Personnel risk management activities conform to the "Personnel Risk
Management Regulations" and other various personnel regulations
administered by the HR Department.
(vii) Reputational risk
• The Corporate Risk Management Department is responsible for reputation
risks to plan and promote reputational risk management.
• Reputational risk management activities conform to the "Reputational Risk
Management Regulations" administered by the Corporate Risk
Management Department.
B) The following activities are carried out as management activities across risk
subcategories.
(i) Outsourcing management• As various operational risks are inherent in the outsourcing of ourCompany business, the Corporate Risk Management Department hasestablishedthe"Outsourcing
Management
Regulations"tocomprehensively adjust the management of outsourcing.
(ii) Business continuity• Our Company has, to ensure business continuity, established a backup office,backup center, and other infrastructures in preparation for the risk of unforeseen
damage from the suspension of our Company's operations caused by a disaster.
In addition, the "Business Continuity Management Regulations," etc. and others(administered by the Corporate Administration Department) are established to
specify measures to be taken in the event of a disaster.
• Our Company has established the "Procedures for Business Continuity
Management” (administered by each department) to specify procedures tobe followed when business continuation becomes difficult due to damage
to or failure of our Company’s systems that are material and essential. In
addition, positioning the outbreak of a new strain of influenza as a major
crisis in our Company, the "Procedures for Response to Pandemic”(administered by the Corporate Administration Department) as response
procedures that our Company should take in accordance with the"Guidelines for Countermeasures against Novel Influenza, etc., inBusinesses and Workplaces" announced by the government.
• The above structures and response procedures for business continuity arereviewed regularly and revised as necessary. Also, drills are conducted
regularly to enhance the effectiveness.
(iii) Responding to important operation accidents• The "Operational Risk Management Regulations" (administered by the
Corporate Risk Management Department) set forth standards for theseverity of operational accidents, and stipulate actions to be taken
according to the severity.
(iv) Risk assessment of new products, etc.
• When introducing new products, etc., the New Product Risk Deliberation
Committee examines risks, including operational risk, conforming to the “New
Product Risk Examination Regulations” (administered by the Corporate Risk
Management Department) to ensure appropriate risk management operations.
(v) Risk Management Deliberation Committee• The Risk Management Deliberation Committee has been established tocoordinate company-wide operational risks, managed by the Corporate
87

Financial Data

Risk Management Department.
C) As comprehensive operational risk management activities, company-wide CSA(Control Self Assessment) is conducted regularly in order to identify, assess,and monitor operational risks. Countermeasures are formulated to risks
identified as the result of CSA to control and reduce risks.
 Calculation of amount equivalent to operational riskA) Method used in the calculation
Our Company calculated operational risk equivalents using the "Advanced
Measurement Approach" at the end of March 2018 and the "Basic Indicator
Approach" at the end of March 2019.
B) Overview of Advanced Measurement Approach implemented at the end of
March 2018
• Calculation is done by totaling the "maximum assumed operational risk losses
for the period of 1 year with a 99.9% one-tailed confidence interval" sought fromfour measurement units (market/customer front operations, middle/planning
management operations, back office operations, and earthquakes) that were set
based on our Company's risk management structure.
• The operational risk equivalents are calculated using the measurement
model and four elements that are the requirements for using the Advanced
Measurement Approach, internal loss data, external loss data, businessenvironment and internal control situation, and scenario analysis.
• In addition, the calculation of operational risk equivalents does not involverisk mitigation by insurance, deduction of expected losses, and adjustment
based on correlations between measurement units.
(9) Risk management policy and procedure outline concerning capital contributionsprescribed in Article 4, paragraph (6), item (iii) of the Order for Enforcement of the Banking
Act and other similar exposures or exposure of equities, and others in the bank accountDefault and other risks are controlled in accordance with the “Rules for Credit Risk
Management.” Securities for which it is extremely difficult to determine the fair value are
evaluated with the cost method adopting the moving-average method.
(10) Interest rate risk
 Risk management policy and outline of procedures
Our Company has established a “Market Risk Management Policy,” which calls
for strict limitation of market risk, and, based on this policy, it aims for safe andsecure management.
Interest rate risk is monitored on a daily basis by setting a limit on the basis pointvalue, ensuring the value is within the set limit. Interest rate risk in the banking bookis measured quarterly and the results are reported to the Risk Management
Deliberation Committee (ALM Committee) and the Executive Committee.
 Outline of calculation method for interest rate risks• Calculation method of ⊿EVE
Our Company does not adopt the core deposit model; therefore, there shall be nointerest review interval for liquid deposits. There are no responses that apply to time
deposits, prepayments of fixed-interest-rate loans and multicurrency loans.
The ratio of ⊿EVE to the core capital at our Company was well below the regulatorylevel of 15% at which we recognize no issue in interest rate risk management.
• Other interest rate risk measurement
Quantity of interest rate risk (basis point value) is measured and managed
daily using the method described in 1.(3) (ii) “Market risk management” of
Financial Instruments on page 74.

888

● Quantitative Disclosure
Note: Status of capital adequacy stipulated in Article 19-2 of the Ordinance for
Enforcement of the Banking Act is included.
(1) Capital adequacy(¥ million)

As of March 31, 2018

As of March 31, 2019

3,471

1,437

Capital requirements for credit risk
Portfolios to which the standardized approach is applied
Securitization exposure
Central Counterparty Clearing House (CCP)

─

─

241

901

─

2,127

Capital requirements for operational risk
Basic Indicator Approach
Advanced Measurement Approach

1,879

─

Total Non-consolidated capital requirements

5,592

4,466

Capital requirements for market risk
None(2) Credit risk
 Of the fiscal year-end balance of exposures related to credit risk, amounts by
category and breakdown by key type of exposures
The fiscal year-end balance of credit risk exposures did not deviate significantly
from the risk position in both the current and previous fiscal years.
As of March 31, 2018
Amount and breakdownof credit risks

By Region
Domestic
Overseas
By Industry
Financial institutions
Japanese central goverment
and central bank
Others:By Residual Contractual Maturity
One year or lessOver 1 year
Exposures with no maturity
dates
Total

Amount and breakdownof credit risks
By Region
Domestic
Overseas
By Industry
Financial institutions
Japanese central goverment
and central bank
Others:By Residual Contractual Maturity
One year or lessOver 1 year
Exposures with no maturity
dates
Total

(¥ million)

Loans and bills discounted,
commitment, and offbalance sheet amount otherthan derivatives

Securities

Others:Total

195,958―

320
17

13,596,039―

13,792,317
17

―

―

291,658

291,658

184,058―

13,177,614

13,361,672

11,900337

126,765

139,003

184,058―――

401,247―

585,305―

11,900337

13,194,791

13,207,029

195,958

337

13,596,039

13,792,334

As of March 31, 2019
Loans and bills discounted,
commitment, and off- Securities
balance sheet amountother than derivatives
179,151―

320
15(¥ million)

Others:Total

10,767,923―

10,947,394
15

―

―

6,767

6,767

167,951―

10,654,235

10,822,186

11,200335

106,920

118,456

167,951―――

91,155―259,106―

11,200335

10,676,767

10,688,303

179,151

335

10,767,923

10,947,410* Credit risk exposures are before taking into account the effect of the credit risk mitigation techniques.
* Exposures related to Central Counterparty Clearing Houses (CCPs) are not included in the breakdown by the key type.

89

Financial Data Fiscal year-end balance of exposures that are overdue for 3 months or longer or
those in default
None Balance and Changes of General Reserve for Possible Loan Losses, SpecificReserve for Possible Loan Losses, and Special Reserve for Certain Overseas
Loans
None
 Write-offs of Claims
None Exposure to which the Standardized Approach is applied
Breakdown by risk-weighted category (after taking into account the effect ofcredit risk mitigation techniques)(¥ million)

Risk Weight
0%
10%
20%
100%
250%
1,250%
Total

As of March 31, 2018
On-balance sheet
Off-balance sheet
13,361,673
11,90073―
303,659―
11,428
―
4,353
―
―
―
13,681,188
11,900

As of March 31, 2019On-balance sheet
Off-balance sheet
10,822,191
11,20072―
66,767―
11,660
―
4,363
―
―
―
10,905,054
11,200* Exposures related to Central Counterparty Clearing Houses (CCPs) are not included in the breakdown by the risk weight.

 Central Counterparty Clearing House (CCP)(¥ million)

Items
Trade exposure
Direct participant
Total
Default fundRisk-Sensitive Approach
Total

As of March 31, 2018

As of March 31, 2019

12,986
12,98632,84332,843

8,213
8,213

33,22733,227(3) Credit risk mitigation technique Breakdown of exposures to which credit risk mitigation technique is applied (ourCompany calculates credit risk assets using the Standardized Approach)(¥ million)

Eligible financial collateral
For corporations, etc.
Total

As of March 31, 2018
111,247
111,247

As of March 31, 2019
31,15531,155(4) Counterparties for derivatives transactions and long-settlement transactions
None(5) Securitization exposure
None(6) Equity exposures Balance sheet amount and Market ValueOur Company does not hold listed stocks or others with fair value.
(¥ million)

Items
Listed equity exposures
Investment/equity exposure other than theabove

As of March 31, 2018
Balance sheet amount
Fair value
―
―
337

―

As of March 31, 2019
Balance sheet amount Fair value
―
―
334

―

9
90

 Gains/losses on sale and write-off of equity exposure
None Unrealized gains/losses recognized in the balance sheets and not recognized in
the statements of income
None Unrealized gains/losses not recognized in the balance sheets and the statements
of incomeNone(7) Gains/losses and changes in economic values to rate shocks used by the bankunder internal controls for the interest rate risk
Item No.

(¥ million)

1
2
3

⊿EVE
Parallel up
Parallel down
Steepener

4

Flattener－

5

Short rate up－

6
7

Short rate down
Maximum

8Core capital

As of March 31, 2019
467
 467
－

－
467
As of March 31, 201940,80291

Financial Data

Disclosure Matters concerning Compensation, Etc.
This section shall relate to compensation, etc. based on the provisions of Article 19-2, Paragraph 1, Item 6, etc. of theOrdinance for Enforcement of the Banking Act (Ordinance of the Ministry of Finance No. 10 of 1982), and disclose the casespecified separately by the Commissioner of the Financial Services Agency as a matter that may have a material impact on thestatus of business operations or assets of banks, etc. (Financial Services Agency Notification No. 21 of 2012).
1. Matters related to the development of organizational structures concerning compensation, etc. of Applicable
Officers and Employees of our Company(1) Scope of "Applicable Officers and Employees"
The following shall describe the scope of "Applicable Officers" and "Applicable Employees, etc."(collectively referred to as "Applicable Officers and Employees") set forth in the compensation notification
to be disclosed.
(i) Scope of "Applicable Officers"
Applicable officers include our Company directors and corporate auditors, but exclude external
directors and corporate auditors.
(ii) Scope of "Applicable Employees, etc."
Of officers and employees of our Company who are not Applicable Officers, a “Person receiving a highamount of compensation” having a material impact on the business management or financial condition of ourCompany and the major consolidated subsidiaries shall be subject to disclosure as “Applicable Employees, etc.”
Information on our Company’s consolidated subsidiaries is omitted as there are no such companies.
There are no “Applicable Employees, etc.” among officers and employees other than “Applicable
Officers” at our Company.
(A) Scope of "Persons receiving a high amount of compensation, etc.""Persons receiving a high amount of compensation, etc." shall refer to those who receive
compensation, etc. exceeding the standard amount from our Company. The base amount is set at ¥21
million in our Group (our Group shall refer to the holding company, which is a parent company, and the
major consolidated subsidiaries).
With regard to lump-sum retirement benefit, the amount obtained by first deducting the full amount of
a lump-sum retirement benefit from the compensation, etc., then adding back the "amount obtained by
dividing the lump-sum retirement benefit by the number of service years" is deemed to be the amountof compensation, etc. for the person, to determine "Persons receiving a high amount of compensation,etc."(B) Scope of "Person having a material impact on the business operations or financial condition of our Company"
A "Person having a material impact on the business operations or financial condition of ourCompany" shall refer to those whose transactions and management matters regularly conducted havea considerable impact on the operation of our Company's business or whose transactions, etc. could
cause a loss with a significant impact on the financial condition of our Company.
(2) Determination of compensation, etc. for Applicable Officers and Employees(i) Determination of compensation, etc. for Applicable Officers
At the General Meeting of Shareholders, our Company determines the total amount of compensation(the maximum amount) for directors and corporate auditors. The Board of Directors is wholly trusted withthe allocation of compensation to individual directors resolved by the General Meeting of Shareholders.
Allocation of compensation to individual corporate auditors is wholly determined by consultation amongcorporate auditors.
2. Pertinence evaluation of system design and operation of compensation, etc. for Applicable Officers andEmployees of our Company(1) Policies concerning Compensation(i) Policies concerning compensation for Applicable Officers
At the General Meeting of Shareholders, our Company determines the maximum amount of totalcompensation, etc. for directors and corporate auditors. Directors’ compensation is resolved by the
Board of Directors, and Corporate Auditors’ compensation is determined by consultation among
Corporate Auditors within the limit of the total amount of compensation resolved by the General Meetingof Shareholders.
3. Consistency between our Company's compensation system for Applicable Officers and Employees and risk
management, and linkage between compensation, etc. and performance
There is a mechanism in place when determining compensation, etc. for Applicable Officers, where thetotal amount of compensation for all officers is resolved by the General Meeting of Shareholders. There is amechanism in place when determining compensation, etc. for Applicable Employees, etc., where budget
measures are taken in consideration of our Company's financial condition and other factors.
4. Types, total amount and payment method of compensation, etc. for Applicable Officers and Employees of
our Company
Total amount of compensation, etc. for Applicable Officers and Employees of our Company (from April 1,2018 to March 31, 2019)(¥ million)

Category
Applicable Officers(Excluding external officers)

Headcount

Total amount ofcompensation,
etc.

9

129

Total amount
Total amount
Retirement
Basic
Stock
of fixedof variable Bonuses benefitscompensation optioncompensationcompensation
128

128

—

—

—

1

Notes: 1. Amount of compensation, etc. for Applicable Officers includes compensation, etc. for Our Group officers.
2. Retirement benefits describe the amount of "Retirement benefits for directors" and "Provision for directors’
retirement benefits" that accrued in the corresponding fiscal year.

5. Other reference matters related to the system on compensation, etc. for the Applicable Officers and Employees
of our Company
There is no particular matter applicable other than those listed in the preceding paragraphs.

992Designated Dispute Resolution Organization Contracted by
JTSB

Japanese Bankers Association*1
Contact: Consultation Desk, Japanese Bankers Association
TEL: 0570-017109 or 03-5252-3772
Trust Companies Association of Japan*2
Contact: Consultation Desk, Trust Companies Association of Japan
TEL: 0120-817335 or 03-6206-3988*1:*2:

The Japanese Bankers Association is a designated dispute resolution organization under the Banking Act and the Norinchukin Bank Act.
The Trust Companies Association of Japan is a designated dispute resolution organization under the Trust Business Act and the Act on Engagement in Trust Business
Activities by Financial Institutions.

93Disclosure Items under the Ordinance for Enforcement of
the Banking Act and other Laws
Article 19-2 of the Ordinance for Enforcement of the Banking Act (described in the following page)
1. Overall Business and Organization
 Management organization --------------------------------------- 37
 List of major shareholders --------------------------------------- 36
 List of officers ------------------------------------------------------- 36
 Name of independent auditors---------------------------------- 37
 List of offices -------------------------------------------------------- 36
 List of agencies ----------------------------------------------------- 36
2. Key Businesses -------------------------------------------------------- 3
3. Matters concerning Key Businesses Business overview in the latest business year -------------- 40
 Indicators showing the status of key business in the last 5
business years• Ordinary income ---------------------------------------------------------- 39• Ordinary profit or loss --------------------------------------------------- 39• Net income or loss ------------------------------------------------------- 39• Capital and total number of shares issued ------------------------ 39• Net assets ------------------------------------------------------------------ 39• Total assets ---------------------------------------------------------------- 39• Deposits -------------------------------------------------------------------- 39• Loans ------------------------------------------------------------------------ 39• Securities ------------------------------------------------------------------- 39• Non-consolidated capital adequacy ratio -------------------------- 39• Dividend payout ratio --------------------------------------------------- 39• Number of employees -------------------------------------------------- 39• Trust fees ------------------------------------------------------------------- 39• Trust account loans------------------------------------------------------ 39• Trust account securities ------------------------------------------------ 39• Total entrusted assets -------------------------------------------------- 39

 Indicators showing the status of business in the last 2
business years(1) Indicators showing the status of key business• Gross profits and gross margin ratio -------------------------- 77• Net interest income, net fees and commissions, net trading
income, other net operating income --------------------------- 77• Average balance, interest, yield and net interest margin ofinterest-earning and -bearing assets -------------------------- 77• Changes in interest earned and paid ------------------------- 77• Return on assets and return on equity ----------------------- 78• Net return on assets and return on equity ------------------- 78(2) Indicators for deposits• Average balance by deposit --------------------------------------- 78• Balance of time deposits by average life -------------------None(3) Indicators for loans and bills discounted, etc.
• Average balance by loan and bill discounted----------------- 78• Balance of loans and bills discounted by average life ----- 78• Breakdown of loans and bills discounted and customer's
liability for acceptances and guarantees by type of collateral---------------------------------------------------------------------------- 79• Breakdown of loans and bills discounted by purpose ------ 79• Breakdown of loans and bills discounted by industry ------ 79• Balance of loans to small and medium-sized enterprises, etc.
and proportion in total amount of loans ------------------------ 79• Balance of specific foreign borrowings ------------------------- 79• Loan-deposit ratio ---------------------------------------------------- 79(4) Indicators for securities• Average balance of trading securities -------------------------- 80• Balance of securities by average life --------------------------- 80• Average balance of securities ------------------------------------ 80• Security-deposit ratio ------------------------------------------------ 80(5) Indicators for trust business• Balance table of assets in trust --------------------------------------- 81• Status of acceptance for money trusts, etc. ---------------------- 81• Status of acceptance for trusts with principal-guaranteedfeatures --------------------------------------------------------------------- 82• Balance of principal by trust period for money trusts,
etc. --------------------------------------------------------------------------- 82• Status of investment for money trusts, etc. ----------------------- 82• Fiscal year-end balance of money trusts, etc. by item of loans
and bills discounted ------------------------------------------------- None
• Fiscal year-end balance of money trusts, etc. by contract periodof loans and bills discounted ------------------------------------- None
• Breakdown of money trusts, etc. by collateral for loans and bills
discounted ------------------------------------------------------------- None
• Breakdown of money trusts, etc. by purpose of loans and bills
discounted ------------------------------------------------------------- None
• Breakdown of money trusts, etc. by industry type for loans andbills discounted ------------------------------------------------------- None
• Balance of money trusts, etc. for SME loans, and ratio to total
amount of loans and bills discounted -------------------------- None
• Fiscal year-end balance of money trusts, etc. for securities - 82

4. Matters concerning Business Operation
 Risk management structure ---------------------------------- 64
 Compliance structure ------------------------------------------ 65
 Status of efforts to improve the management of SMEs andrevitalize local communities ------------------------------- None Designated dispute resolution organization -------------- 93

5. Matters concerning Status of Assets in Last 2 BusinessYears Balance sheets, statements of income, and statements ofchanges in net assets ------------------------------------- 70~72
 Balance of risk-monitored loans ---------------------------- 76
 Status of capital adequacy level ---------------------------- 88
 Fair value of securities and money trusts and status ofderivative transactions ----------------------------------------- 76
 Balance of allowance for loan losses and changes during
the period ---------------------------------------------------------- 76
 Write-off of Loans and bills discounted-------------------- 76
 The fact that an accounting audit is received ------------ 76

Financial Services Agency Notification No. 7 of 2014
1. Composition of Capital Disclosure ------------------- 83~84
2. Qualitative Disclosure ----------------------------------- 85~88
3. Quantitative Disclosure --------------------------------- 88~91

Financial Services Agency Notification No. 21,
Article 1 of 2012
1. Disclosure Matters concerning Compensation, Etc. - 92

Article 6 of the Ordinance for Enforcement of the Act
on Emergency Measures for the Revitalization of the
Financial Functions
1. Bankruptcy or Reorganization Claim or Other Equivalent
Claims ------------------------------------------------------------ 76
2. Doubtful Claims ------------------------------------------------ 76
3. Substandard Claims ------------------------------------------ 76
4. Normal Claims ------------------------------------------------- 76

994

Trust & Custody Services
Bank, Ltd.

CONTENTS

Corporate Data

96

Vision: To Be the Top Player in Asset administration Services 98■ Basic Strategy■ Our Commitment■ Highlights of Performance■ Issues to Be Addressed

Deliver the Best Solution to Meet Customer Needs

101■ From "Custody" to "General Asset administration Services"
1. Securities Administration Service
2. Value-added Asset administration Services

Infrastructures Supporting the Best Solution

117

1. Office and System Infrastructures
2. Internal Management Systems

Financial Data

129

95

Corporate Data (As of July 1, 2019)
Corporate Profile
Corporate nameHistory■ January 2001

Trust & Custody Services Bank, Ltd.

Establishment of Trust & Custody Services Bank,Ltd.

Establishment

January 22, 2001

Location

Harumi Island Triton Square Tower Z,

Launch of information integration services

8-12, Harumi 1-chome, Chuo-ku,

Trusted with asset administration business of life

■ February 2001

insurance companies

Tokyo, 104-6228■ December 2001

Representative

Nobumitsu Watanabe, President
CEO

TEL

03-6220-4000

Capital¥50 billion

Shareholders

JTC Holdings, Ltd. 1,000,000 shares(100%)

Number of employees

697 (as of March 31, 2019)* Number of employees includes employees seconded
from other companies.

&

Trusted with assets of Mizuho
Trust & Banking in a reentrustment agreement■ April 2002
Consolidation of custodian services for domestic
investors at Mizuho Bank
■ January 2003
Launch of comprehensive securities
administration outsourcing services■ June 2013
Launch of middle- and back-office

URL

http://www.tcsb.co.jp/

service for asset administrationcompanies■ February 2016
Launch of collateral management
services for over-the-counter
derivatives transactions■ March 2018
Conclusion of business merger
agreement with Japan Trustee Services
Bank■ July 2018
Partial business transfer of direct trust to
Mizuho Trust & Banking■ October 2018
Establishment of JTC Holdings through joint sharetransfer with Japan Trustee Services Bank

96

Organization Chart
General Meetingof Shareholders

Internal Audit Committee

Collateral Operations
Department
CS OfficeInternal Audit Department

Management Administration
Services Department
CS OfficeInvestment Trust Services
Department
CS OfficeSettlement Management
Department

Custody Client Services
Department
CS OfficeInvestment Information
Services OfficeInternational Custody
Operations Department
CS OfficeInternational Settlement Office

Domestic Custody
Operations Department
CS Office

Securities Lending & Management
Department

Investors Services Department

Treasury Department

System Development Department

IT & Systems Planning Department

System Risk Management
Department

Operations Planning
Department

Products Division

Digital Innovation Office

Quality Management OfficeCompliance & Legal Affairs
Department

Risk Management Department

Human Resources Department

Consolidation Designing
Department

Fiduciary Duty Promotion
OfficeAccounting Office

Corporate Planning
Department

Business Promotion Division

CS OfficePresident & CEO

Settlement Management
OfficeBusiness Policy Committee*

Corporate Auditors
OfficeLife Insurance Company Asset
Custody Department

Board of Directors

Corporate Auditors/Board of
Corporate Auditors

CS OfficeExecutive Management
Committee(CS Office: Customer Services Office)* As the Business Policy Committee, various committees are established, including the Compliance Committee.

Corporate Officers
President & CEO

Nobumitsu Watanabe Director

Deputy President

Akira Noguchi

Full-time Corporate
Auditor

Makoto Saito

Senior Managing Director

Hiroyuki Obata

Full-time Corporate
Auditor

Hiroto Uchino

Managing Director

Yasushi Makino

Corporate Auditor

Masato Monguchi

Director

Hiroki Tanaka

Corporate Auditor

Takehiko Watabe

Director

Masao Kanemaru

Managing Executive
Officer, Head of Products

Masafumi Yoshida

Shigeaki Asai

Division

Director

Goji Fujishiro

Managing Executive
Officer, General Manager

Minoru Mochizuki

of Consolidation Designing
Department

Director

Director

Yukihiro Fujioka

Executive Officer,

Tomohiro Nishio

Executive Officer,

Head of Business
Promotion Division

General Manager of Life
Insurance Company Asset
Custody Department

Kenji Yoshikawa
Taku Murakawa

97

Vision: To Be the Top Player in Asset administration Services

Basic Strategy
responding to customers' "newdemands" with a "new administration service," we shalltransform ourselves from “custodian” to “general asset
administration service provider” to "Be the Best Partner ofBased on the action principle ofCustomers in Sophistication of their Asset Management."

From "Custody" to "General Asset administration
Services"

Collateral management
service for over-thecounter derivatives
transactions
February 2016

Middle- and backoffice services for
asset managementcompanies
Comprehensive
securities
administration
outsourcing
service

Custody
services

Securities
lending
services

June 2013

January 2003

Administration service

Value-added services

98Our Commitment
Based on our Philosophy of Customer First, advanced administrative andsystem infrastructures, and strict internal management systems, we shallprovide the "Best Solution for Customer Satisfaction" through the practice ofFiduciary Duty.

Providing the Best Solution

Customers

Advanced officeand systeminfrastructures

CustomerFirst

Strict internalmanagement
systems

Practice of Fiduciary DutyCustomer FirstIn line with our Philosophy of Customer First, we are actively engaged in improving customer satisfaction.
Specifically, in order to collect customer opinions in a multifaceted manner, the Customer Service Office is set up
in all departments of the Products Division responsible for operations, and we are directly applying the identified
customer needs to improve our services.
In this way, all officers and employees will work together to provide the highest level of asset administration
services with a constant awareness of "Providing optimal solutions adapting with agility to changes in customers'
environments and needs."

Advanced Office and System Infrastructures
Our Company has established the Digital Innovation Office to actively promote the use of new digitaltechnologies, such as robotic process automation (RPA) and artificial intelligence (AI), in order to improve thequality of office work and create high-value-added businesses. Each operation division leverages newtechnologies to improve business processes and further strengthen and increase the efficiency of office work.
System infrastructures that support these kinds of office work are strategically developed to steadily respond to
the Reform of Securities Clearing and Settlement System and the development of fine-tuned functions to meet thediverse needs of our customers.

Strict Internal Management System
As a leading trust bank specializing in asset administration in Japan, recognizing the importance of its social
responsibility and public mission, we consider strict compliance to be a fundamental management principle, andpractice "corporate activities with integrity and impartiality that comply with laws, regulations, and social norms."
We shall tirelessly strive to strengthen our risk management system to ensure excellent management at all
times and to win the trust of our customers.

99

Vision: To Be the Top Player in Asset administration Services

Highlights of Performance
The balance of assets under custody as of the end of March
2019 was ¥382 trillion
Net business profits in FY2018 were ¥800 million
Changes in Balance of Assets under CustodyChanges in Income

At the end of the fiscal year under review, thebalance of fiduciary assets and assets undercustody based on standing proxy contracts was¥382 trillion, remaining at the same level as at theend of previous fiscal year.

Gross profits for the fiscal year under review were
¥22,993 million (up ¥1,061 million year-on-year), while
general and administrative expenses were ¥22,239
million (up ¥1,198 million year-on-year) as
management resources were invested to further
strengthen office & system and human resource
infrastructures. As a result, net business profits were¥778 million (down ¥113 million year-on-year).

¥382 trillion

Balance of assets under custody(¥ trillion)¥380
trillion¥380
trillion¥385
trillion¥382
trillion

2015/3E

2016/3E

2017/3E

2018/3E

Net business profits(¥ million)

2019/3E

FYE 2015/3 FYE 2016/3 FYE 2017/3 FYE 2018/3 FYE 2019/3

Issues to Be Addressed
The investment environment surrounding our customers has become more challenging due to theintroduction of negative interest rate policies in Europe and Japan, and customers’ investment options,regions, and styles have diversified at an unprecedented speed.
Under such circumstances, we shall strive to accurately understand the increasingly diverse andcomplex needs of our customers in a timely manner, formulate product and service strategies that
respond to their needs and changes, and develop speedy solutions to their "New Initiatives."
Also, through the business merger with the Japan Trustee Services Bank, efforts shall be further
strengthened to demonstrate our expertise in a broad range of fields, strengthen our operation systems,
and develop expert human resources.

100Deliver the Best
Solution to Meet
Customer Needs

CONTENTS■ From "Custody" to "Asset administration Services"102

1. Securities Administration Service

104■ Trust service■ Domestic custody (standing proxy) service■ Overseas custody services■ Asset administration service for defined contribution pension plan
■ Master Trust service (information integration service)

2. Value-added Asset administration Services

110■ Securities lending service■ Comprehensive securities administration outsourcing service■ Collateral management services for over-the-counter derivatives

transactions■ Middle- and back-office services for asset management companies

101Deliver the Best Solution to Meet Customer Needs

From "Custody" to "General Asset administration Services"["General Asset administration Services" that meticulously meet customer needs]
With the emergence of new types of financial instruments and progress in the Reform of Securities Clearing and
Settlement System, customer needs have become more diverse and complex, and the role of custodians insecurities settlement has become increasingly important.
Our Company offers a full line-up of the asset administration services, ranging from basic custody services(custody of securities and settlement of transactions, receipt of principal and interest and dividends, etc.) for
securities administration, and securities lending that pursues added value, to office work services responding tovarious outsourcing needs (middle- and back-office work for asset management companies, collateralmanagement services for over-the-counter derivatives transactions, etc.). Through meticulous consultation, we
strive to meet the specific needs of each customer and offer optimized services.
●

Custody services
Custody services is a collective term for services entrusted by customers to carry out custody of securities and delivery/settlement of transactions, or receipt of principal

and interest/dividends, etc. In addition to standing proxy services based on comprehensive agency authority, account management agency services are also provided
based on the book-entry system established in the Reform of Securities Clearing and Settlement System.

Value-added services

Collateral management service forover-the-counter derivatives
transactions
Middle- and back-office services for
asset management companies

Securities Lending Services
Comprehensive securities
administration outsourcing service
Master trust services(Information integration services)
Transition management

Corporate action

Basic services

Fund settlement

Securities settlement andcustody services
Safekeeping service

Customer needs

102[Responding to institutional reforms and improving service initiatives]
After a transition to the book-entry transfer system from 2003 to 2009, the Reform of Securities Clearing and
Settlement System has continued to make progress in Japan, including shortening of a settlement period for JGB
transactions implemented in May 2018 (T+1), stock transactions implemented in July 2019 (T+2), and nongovernment transactions scheduled to be implemented in July 2020 (T+2). Along with these regulatory reforms,
the services provided by our Company have also evolved and are highly regarded by many financial institutions
and institutional investors.
The Reform of Securities Clearing and Settlement System has had a significant impact on the practice and costs,
and there are growing needs to outsource administration work and systems. In addition to the traditional asset
administration services related to securities administration and settlement, our Company shall actively develop avariety of services to meet outsourcing needs related to office work, which will put burden on customers due toregulatory and institutional reforms.

Progress in the Reform of Securities Clearing and Settlement System
2003

Government
bonds

Short-term
bonds

2010

2005

2015

2020

May 2018: Shortening of a settlement period for government bonds
June 2014: Start of use of counterparty clearing for JGB lendingtransactions for trusts
October 2015: Launch of the new BOJ-NET settlement system
February 2016: Expansion of BOJ-NET business hours

January 2003: Launch of the new
book-entry system
January 2003: Corporate Bonds,
etc. Transfer Act comes into effect

March 2003: Launch of the book-entry
transfer system

November 2006: Start of collective migration of outstanding bonds

Nongovernment
bonds

July 2020: Shortening of a settlement period
for non-governments

January 2006: Launch of the book-entry transfer system
January 2008: Abolition of registration system(Registration system)

Interests ininvestment
trustsJanuary 2007: Launch of the book-entry transfer system

June 2004: Enactment of the Act on Book-Entry
Transfer of Corporate Bonds and Shares

StocksMay 2004：Launch of general book entry DVP(Book-entry transfer system based on the storage transfer
method)July 2019: Shortening of a settlement period
for stock trading

January 2009: Launch of the new book-entry transfer
system and promotion of paperless operations103

1. Securities Administration Service
Deliver the Best Solution to Meet Customer Needs[Trust services]
As a major trustee of Mizuho Trust & Banking, our Company is entrusted with the asset administration businessof pensions, investment trusts and corporate investment funds, etc. under the re-trust method.
In re-trusts, Mizuho Trust & Banking serves as the trustee of original trusts, providing asset management,
pension actuarial, and administration services, in addition to serving as a contact point with customers. Under there-entrustment agreement, our Company provides services such as management, disposal, settlement,
accounting, and reporting of securities, as a trustee of the re-trust.

We also provide trust services under direct trust agreements to major public pension funds and institutional
investors.
Direct trusts provide administration services, manage and dispose of securities and settle funds in accordancewith the instructions of clients and investment management companies entrusted by clients with investment
decisions.
As of March 31, 2019, trust assets under management are estimated to be ¥143 trillion (the balance of re-trusts
is estimated to be ¥80 trillion, while that of direct trusts is estimated to be ¥63 trillion).

Re-entrustment
Customers

Trust & Custody Services Bank (TCSB)

104

Fiduciary Duty

Trust contract

Mizuho Trust & Banking
Re-entrustment
agreement

Tripartite agreement

Fiduciary Duty

(Pension funds, investment trust management companies, etc.)

[Domestic custody (standing proxy) service]
As a result of a series of reforms to the securities settlement system and the diversification of securities
managed by clients, the burden of securities administration on clients is increasing along with needs foroutsourcing. Under such circumstances, our Company provides a full line of custody services for all types of
securities. We shall also respond to new procedures associated with the institutional reforms with speed.

● Provision of services through TCSB Custody-net
The custody service in our Company is provided by TCSB Custody-net, which connects customers with ourCompany via the Internet. Execution and settlement instructions to our Company using TCSB Custody-net are
encrypted and processed by our Company through STP (straight-through processing). TCSB Custody-net has
already been used by more than 100 companies, and is popular with approximately 70% of regional and secondtier regional banks.

● Meticulous provision of information
Among information provided by the Japan Securities Depository Center, the Bank of Japan, etc. on the Reformof Securities Clearing and Settlement System, our Company selects and provides information that is useful for ourcustomers in an easy-to-understand manner through TCSB Custody-net. To improve the convenience ofcustomers, frequently asked questions have been prepared based on matters that customers often enquire about.
We will continue to provide customers with useful information in a timely manner.

Custody services
Providing meticulous and centrally managed services throughCustomers
Instruction
on entries

Trust & Custody Services Bank (TCSB)

Matching of storagetransfer settlement

NonNon-government bondgovernment
custody service
bonds
Storage transfer nongovernment bonds

Internet

Government
bonds

Government bondcustody service

Settlement processing
control

BOJ-NETJASDEC
stocksStanding proxy
contract

Feedback
information

Domestic
stocksDomestic stock custody
serviceSecurities management service
contract

Mizuho Trust & Banking

105

1. Securities Administration Service
Deliver the Best Solution to Meet Customer Needs● Provision of stock and bond custody services
Our stock custody service provides a wide range of administrative services from custody of REITs, ETFs, andpreferred securities, settlement of transactions to corporate action, in addition to listed stocks. We will continue toimprove our service levels after the digitization of stock certificates by responding to customer requests, forexample, by strengthening communication of corporate action information.
Bond custody services include the custody of domestic bonds such as Japanese government and nongovernment bonds, settlement of transactions, and proxy receipt of principal and interest.

TCSB Custody net screen

Information for all
customers

Select from theservice menu

106

Information for
individual customers

[Overseas custody services]● Global custody network
In recent years, investments in foreign securities has diversified due to customers' international diversified
investment being more vigorous. In addition to the overseas base network of Mizuho Financial Group, ourCompany has built a custody service network that covers approximately 100 markets around the world by alsoutilizing overseas custodians outside the Group. In selecting overseas custodians, we evaluate safety using
external ratings, administrative capabilities, fees, etc. Even after the selection, regular evaluations are conducted
through on-site inspections, service review meetings, and confirmation of external audit reports, in order tomaintain and improve the quality of overseas custody services.

● Website services
Our Company's website enables customers to send payment instructions from their personal computers, receive
reports, and download data files. The service provides efficient settlement of foreign securities and enables
customers to manage their investment assets in an integrated manner across multiple regions and markets.

Overview of overseas custody services

Trust & Custody Services Bank

Query

Customers

Instruction for settlement sent
Report received

Global custodyagreement

Network, etc.

Mizuho Trust & Banking

Overseas custodian
Mizuho Bank (USA)Mizuho Trust & Banking Luxembourg
Other major overseas custodians107

1. Securities Administration Service
Deliver the Best Solution to Meet Customer Needs[Asset administration services for defined contribution pension plan]● Expansion of defined contribution pension markets
The defined contribution pension market has steadily expanded since the enactment of the "DefinedContribution Pension Act" in October 2001. As of the end of March 2019, 6,161 cases of pension provisions wereapproved for "Corporate type" (up 331 from the previous year). For "Individual type," the number of insured (Type
1 Insured + Type 2 Insured + Type 3 Insured) increased to 1,210,037 (up 356,314 from the previous year)
following the expansion of the scope of insured under the Revised Act in January 2017.
* Defined contribution pension
Major corporate pension systems in Japan (employees’ pension fund and defined-benefit corporate pension) are the defined-benefit pension with a predeterminedamount of benefits, whereas the defined contribution pension, as represented by the 401(k) Plan in the United States, is a system in which the amount of premiums ispredetermined but the amount of benefits is determined based on the investment performance.

● Active development of infrastructures
As of the end of March 2019, our Company is entrusted with a total of 2,231 corporate and individual defined
contribution pension plans (up 146 from the previous year). Our fiduciary service structure is connected to four
record keepers and boasts the largest number of connections among asset administration organizations, highly
trusted and appreciated by Mizuho Financial Group, contributing life insurance companies, who are our clients,and many local financial institutions.
We will continue to actively improve system and business infrastructures to meet the needs to handle diverse
investment products and other various requests of operational management agencies.
* Record keeper
This refers to an operational management agency for record keeping. The agency compiles the investment instructions of insured, records and manages personal data,
and adjudicates benefits. Our Company is connected with four companies: Japan Investor Solutions & Technologies Co., Ltd. (JIS&T), Sompo Japan Nipponkoa DC
Securities Inc., SBI Benefit Systems Co., Ltd., and Nippon Record Keeping Network Co., Ltd. (NRK).

Overview of asset administration services for defined contribution pension plan
Pensionprovisions
Contributions (premiums)

Corporate
employees

Operational
management
agencies

Assetadministration
organizations

Investment
product
providers

Trust & Custody
Services Bank(TCSB)*

Trust bank

Bank

Investment
instruction

RecordkeeperBenefit
instruction

Benefitapplication

Recipients

Securities
company
Transaction
procedureFund
settlement,
etc.

Insurancecompany
etc.

Benefits* Service contents● Payment management including matching of contributions (premiums)● Fund settlement, transaction procedures and other asset administration for investment products
based on investment instructions compiled by the Record Keeper● Separate maintenance and management of contributed pension assets● Remittance of benefits to recipients based on benefit instructions by the Record Keeper● Tax payment on benefits, etc.

108

[Master Trust services (Information integration services)]● Addressing the need for centralized management (Master Trust)With an ongoing review of the pension system, there is an increasing need to centralize the management(Master Trust) of multiple pension systems by a single asset administration organization. As a pioneer in thecreation of a Japanese version of the Master Trust, our Company has introduced a full-scale "Information
Integration Service" that centrally manages investment management information.
* Master Trust
It refers to a mechanism where a single trust bank centralizes management and financial reporting of pension assets under a single contract designed to manage multiple
pension plans or investment managers.
Led by the United States in the 1970s, monopolization has progressed with the emergence of giant Master Trusts.
In 2004, the ban on discretionary investment in trust banks was lifted in Japan, and full-scale operations began.

● Highly convenient services
As part of the Japanese version of a Master Trust, the "Information Integration Service," offered to pension
sponsors and other customers, summarizes and analyzes investment information from multiple investment
agencies using the same criteria, and provides information on the investment performance of the entire pension
plan in a timely manner via the Internet.
The Service is not only designed to monitor the performance and other status of investment, but also to enhancerisk management functions such as rating checks and cost analysis. The service is also equipped with thefunctions of secondary processing for customers by downloading data, and “Aggregation Service of Multiple
Pensions” designed for centralized management of pension systems.
In addition, the "Performance Monitoring Service" is also available online to check the investment performancedata and operation guidelines prepared and provided by the investment agencies.
* Aggregation Service of Multiple Pensions
When there are multiple pension schemes, such as employees' pension funds and defined-benefit corporate pension funds, the service offers a function that makes it
possible to analyze the investment status by aggregating these pension schemes. In this way, total management is realized beyond the frameworks of pension systems.

Overview of Master Trust service

Performance analysis
Return calculation
Benchmark comparison; Factor analysis
Risk/return analysis

Portfolio management

Book value data

Identify deviation from asset mix

Modified total asset yield

A service menu selectedaccording to customer
needs
Compliance check
Cost analysis

Balance/Transaction
statement

Operation guideline check
Operation cost calculation

Data download function
Stock search function1092. Value-added Asset administration Services
Deliver the Best Solution to Meet Customer Needs[Securities lending services]● Securities lending service
The service allows customers to enjoy additional income by lending securities to securities companies in thedomestic and overseas lending markets. Security lending is now an essential service for market participants toenhance investment performance.

● Operation structure leveraging a top-class presence in the markets
A major factor in the securities lending market is the asset scale that can meet a wide range of borrowers' needs
at all times and the market presence. This is an area where our Company's economies of scale can be leveraged.
Our Company has established a department dedicated to lending operations, and has assigned personnel withextensive expertise in lending operations to the department. We are also aggressively investing in IT systems
aimed at strengthening of structures to broaden the scope of operations.
Our Company has an unchallenged presence in the domestic bond repo market and the domestic stock lending
market, and also engages in the lending of foreign bonds and stocks to provide a full line of lending services.

● Domestic bond repo (cash-secured bond lending transactions) service
Bond lending transactions in the domestic repo market and funds transactions in the short-term money market
leverage securities trusts and domestic bonds under the standing proxy agreement. Our Company has been highly
rated by major domestic institutional investors and market participants as the main player in the markets, with anindustry-leading record of balances in trusts and loans for the service.

● Domestic stock lending service
Stocks entrusted as pension assets and domestic stocks entrusted by institutional investors are loaned in thedomestic stock lending market. Operation performance is improved by closely observing the borrowers' needs.

● Foreign bonds and stock lending service
Foreign bonds and stocks held by major pension funds, insurance companies and banks in Japan are loaned
and invested in overseas markets (North America and Europe) by our Company, or Mizuho Financial Group’s
overseas base network and other overseas custodians selected as lending agents (loan agents). Going forward,
we will continue to expand the brands that are eligible for loans and loan management markets to promote theexpansion of asset scales.

110

● Strict risk monitoring management system
Our Company has established management systems for various risks (credit risk of borrowers, investment risk
in cash collateral, liquidity risk in collateral, etc.) arising from the lending operations. Selection of borrowers
requires approval of an independent screening unit (Risk Management Department), which monitors daily thecredit ratings, compliance with credit limits, and acquisition of collateral.

Rental fee

Loan agency
agreement

Rental fee

Loan
Collateral
Rental fee

Domestic financial
institutions

Domestic securities

Collateral fund investment

Overseas financial
institutions

Repo lending enabling contract andmemorandum

Loan
Collateral

Overseas custodian lending
agent

Trust/custody agreement

Foreign securities

Tri-party memorandum

Trust & Custody Services Bank (TCSB)

Re-entrustment
agreement

Customers

Trust agreement(pension, etc.)

Mizuho Trust &Banking

Overview of securities lending service (Example: Re-trusted by Mizuho Trust & Banking)Characteristics of Service● Gain additional income by investing securities undertrust/custody agreements in the loan markets<Points on operation management>•••

Selection of borrowers in line with customer standards.
Assessment of market situation and access to many borrowers.
Daily monitoring of various risks (credit status, compliance with thelimits, collateral delivered, etc.)111

2. Value-added Asset administration Services
Deliver the Best Solution to Meet Customer Needs[Comprehensive securities administration outsourcing service]● First domestic trust bank model
For securities held by life insurance companies and other institutional investors, we have developed a businessmodel that undertakes full outsourcing of management and administrative functions, including securities
accounting, and commenced service in January 2003.
A major feature of this business model is its comprehensive outsourcing model, the one and only
groundbreaking service as a domestic trust bank. The service covers from investments including domestic andoverseas securities, derivatives transactions, investment trusts such as REITs and ETFs, investment partnerships
and LPS, integrated management of the incidental transactions, settlement of securities and funds, to securities
accounting office work (asset evaluation, preparation of accounting entry data, closing data, various management
and reporting materials, etc.).

● Significant cost reduction impact
While it is essential to comply with the Reform of Securities Clearing and Settlement System, shortening of asettlement period, system development and maintenance impose a significant burden in terms of both investment
costs and personnel costs for development and maintenance staff.
Our Company's comprehensive outsourcing model enables institutional investors to build and share a common
system infrastructure, resulting in a significant reduction in system costs compared to independent infrastructuredevelopment. In addition, personnel costs can be significantly reduced, including operations, development andmaintenance staff for securities accounting.

● Meticulous response to diverse needs
At our Company, planning staff with the right consulting skills are assigned to precisely respond to customer
needs. In addition to providing high-quality administrative services, capitalized on the cost benefits by using acommon platform, we will proactively respond to the request of individual customers with our experienced staff.

112

Basic Outsourcing Model"Delivery and settlement services" + "Securities accounting"  "Comprehensive outsourcing" model
Investment decision making
Purchase order
Asset Investment
DivisionAssetadministration
situation report
Asset administration Division● Consideration of new products
and institutional changes● Performance management/riskmanagement● Compliance check● Exercise of voting rights

Institutional investor

Execution of transaction(Securities company)

Report on results

Confirmation of
execution andsettlement
Execution andsettlement
instructions

Transaction
reportTrust & Custody Services Bank

Asset administration
situation report
Settlement completion
reportAssetadministration● Collation of execution data with securities
outsourcing
Delivery and settlement
services

Securities accounting

companies● Settlement of securities and funds, storageof security certificates● Cash dividend and capital transfer
processing● Preparation of accounting entry data
● Preparation of asset valuation data
● Data preparation for management
documents● Data preparation for account closing

The above is a list of basic models that are tailored to customer needs.

Characteristics of Service● Contributing to reduction of customers’ office work
Reduction of workload by undertaking general office work,
including securities accounting● Realizing significant cost savings
Substantial reduction in system development and maintenancecosts through the construction and joint use of common systeminfrastructures● Tailored to each customer
Meticulous programs can be designed in a way that is tailored toindividual customer needs

113

2. Value-added Asset administration Services
Deliver the Best Solution to Meet Customer Needs[Collateral management services for over-the-counter derivatives transactions]● Margin rules on OTC derivatives transactions
Following the financial crisis triggered by the bankruptcy of Lehman Brothers in 2008 and the relief of AIG Life,financial authorities around the world gathered and imposed margin rules on financial institutions for over-thecounter derivatives transactions.
Specifically, the rules (1) sought a real-time margin contribution calculated by each central clearing housethrough promotion of the central clearing of over-the-counter derivatives transactions and (2) for non-central
clearing transactions, imposed depositing and the obligation of restitution of initial margin (contribution of collateral
for changes in latent future fair value) and variation margin (exchange of collateral at current fair value).
As for the variation margin rules, although laws and regulations vary depending on the balance of derivatives
transactions, almost all financial institutions are subject to the rules, in principle, to calculate, exchange andmanage variation margin on a daily basis.

● Start of outsourcing services to reduce the burden of financial institutions
Compliance with over-the-counter derivatives regulations requires clients to incur significant costs in establishingadministrative systems, developing systems, and securing the necessary human resources. In addition, personnel
with a certain level of knowledge and experience are required, such as the ability to communicate (language)
when a business partner is a foreign corporation or overseas base, and manage complicated transactions when
multiple business partners are involved.
In order to avoid the burden of response, there is a growing need to outsource derivatives collateralmanagement services. In February 2016, our Company launched a collateral management service for variation
margin on non-central clearing transactions. Our Company provides appropriate collateral management services
on behalf of clients by utilizing the securities administration know-how cultivated over the years.
In October 2016, the Collateral Operations Department was established as a dedicated unit to meet diverse
needs for advanced collateral management.

Trust & Custody Services
Bank

Customers
Transaction data
Fair market valuation oftransactions
Aggregated valuation of gain or loss
by business partner

Fair market valuation oftransactions

Fair market valuation of collateral

Aggregated valuation of gainor loss by business partner

Calculation of required collateral

Fair market valuation of collateral

Reconciliation with transaction
partners

Calculation of required collateral
Reconciliation with transaction
partners

Reconciliation

Dispute with transaction partners

Final judgment on dispute

Dispute with transaction partners
Inform results/
consultation

DisputeCollateral management

Collateral management

Instruction to pledge/collect
collateral
Transfer and balancestatement report
Collateralmanagement
service agreement

Mizuho Trust & Banking

114

Claiming, collating,and settling collateralInterest on cash
collateral

Transaction partners

Sending transaction data▼ Calculation of required collateral amount for each counterparty
After the derivative transaction data are valued at fair value and sent from the customer, the required amount ofcollateral is calculated by aggregating the "Fair value of derivatives" and the "Fair value of collateral" received orpledged by the previous day for each counterparty.
▼ Reconciliation of transactions and balance with counterparties
Contents of individual transactions underlying the fair value of derivatives are collated with counterparties. In
order to shorten a business process, automated collation is usually performed using triResolve and other systems.
●

triResolve
It refers to a system that reconciles transactions on the Internet using a matching engine developed by the Swedish company TriOptima. Derivative and foreign exchangetransactions with a significant deviation in fair value and those that do not match can be immediately identified.

▼ Sending/receiving notice of required collateral amounts (execution of margin calls)
Transaction partners are notified of the deposit of additional collateral when there is a shortage of collateral
received, and of the return of collateral when there is an excess of collateral deposited.
▼ Dealing with discrepancies in recognition of required collateral amounts (when a dispute occurs)
When an agreement cannot be reached on margin calls between parties (a dispute), appropriate negotiations
will be conducted to fix the amount of margin calls based on the measures formulated with a counterparty inadvance.
▼ Determination of collateral, and provision of collateral transfer and balance details
Collateral is determined by agreement with counterparties on the required amount, and details of collateraltransfer and balance are prepared for each counterparty and sent to the customer.

Characteristics of Service● Reduction of costs incurred from the development of structures
Achieving lower costs than building an in-house administrative
structure and system infrastructures● Accumulation of know-how from numerous CSA office work
services
Providing practical support developed by the CSA office work service
experiences of serving numerous customers

115

2. Value-added Asset administration Services
Deliver the Best Solution to Meet Customer Needs[Middle- and back-office services for asset management companies]● Growing needs for administrative outsourcing among asset management companies
Since around 2000, U.S. and European asset management companies have established a business model inwhich they concentrated on asset management front operations and outsourced a wide range of middle/backoffice operations (post-trade business) to custodians and fund management companies after execution for thepurchase and sale of securities. In Japan, the base price calculation process for the investment trust business had
been outsourced on a limited basis in the past. Recently, however, the need to outsource the entire middle- andback-office operations has increased in pursuit of more efficient asset management operations.

Asset managementcompanies

Inform on
execution, etc.

Trust & Custody
Services Bank

Middle office
operation

Back office operation

Disclosure operation

Bulk undertaking by
our Company

Front office operation

Middle office
operation
Back office operation
Base price calculation

Disclosure operation

Matching execution
Execution
instructions, etc.

Base price matching

Brokers

Trusted bank

Informing base price
Additional setting andcancellation
ReportDistributor● Expansion of administration service
In 2013, our Company commenced middle- and back-office operation services for asset managementcompanies within the Mizuho Group.
The entire post-trade operations are entrusted, from middle office operations (processing and management ofexecution, etc.) and back-office operations (accounting, closing of accounts, etc.) to disclosure operations(preparation of prospectuses and investment reports, etc.).
In the future, we will extensively provide high-quality administrative services capitalized on know-how
accumulated through administrative services from asset management companies within the Group.

Characteristics of Service● Broad range of business covered by the service
The service covers the entire post-trade operations, from middle- andback-office operations to disclosure operations● Flexible response
It responds to outsourcing needs of each business in the unit ofinvestment trust back operation and investment trust disclosure
operation

116

Infrastructures Supporting
the Best Solution

CONTENTS

1. Office and System Infrastructures

118■ Information system development and operation structure■ Administration quality management structure■ Business continuity structure

2. Internal Management System

122■ Legal compliance management system■ Information management system■ Risk management system■ Internal audit management system■ External audit

1171. Office and System Infrastructures
Infrastructures Supporting the Best Solution[Information system development and operation structure]
More sophisticated information systems are essential for asset administration operations to process large
volumes of securities custody and settlement transactions with agility and accuracy. Our Company is actively
working to enhance its communications and electronic systems underlying the asset administration operations.

● Adoption of flexible open systems
With the aim of responding flexibly and quickly to changes in the external environment, our Company has
become the first trust bank in Japan to adopt open systems using UNIX servers for all business systems. As aresult, we have been able to respond flexibly to changes in the business environment while significantly reducing
investment costs.

● System groups consisting of four independent tiers
The feature of our Company’s system is that it consists of four tiers (system groups) from Tiers 1 to 4.
Tier 1 is responsible for various external interfaces, Tier 2 is responsible for common operations such as
securities and fund settlement and fair value information management, Tier 3 is responsible for accounting
process for each fund, and Tier 4 is responsible for information systems centered on disclosure. Of those, while
Tier 3 is a product-specific system for each asset administration product (pensions, investment trusts, corporate
investment funds, etc.) in order to precisely respond to the characteristics of each product, Tier 2 and 4 aresystems common to all products that are integrated into functional units.
This system configuration allows us to respond quickly to institutional changes that are unique to asset
administration products, as well as those that affect all products. As an example, the Tier 2 settlement system canoperate 24 hours a day without being affected by the Tier 3 fund accounting processing, in anticipation of ashortened settlement period in the future.

● Continuous initiatives towards straight-through processing (STP)
Progress in STP is essential for processing large volumes of transactions quickly and accurately. In both
domestic and foreign securities transactions, our Company upgrades the system each year to automate a series ofprocesses, from uploading, collation, accounting and settlement to reconciliation of execution. In particular,interfaces with investment agencies and securities companies, which are the starting point of STP, are madeavailable in various ways such as CPU connection, through package tools, SWIFT, and the Internet.

118

Conceptual Diagram of our Company System

External
agencyTier 1 (external interface system)

Tier 3(fund accounting system)

Clearing
house

Securities
company

Investment
agencies

Information
vendorPensionInvestment
trust

Tier 4(information system)

Comprehensive
outsourcing

Disclosure service
Corporate
investment
fundStanding
proxy

Tier 2 (common system)
Commoninformation
management

TrustorSettlement
systemInvestment
agencies● FY2018 Initiatives
In FY2018, we addressed the following key issues to respond systems, develop system infrastructures, andimprove customer services.
No.

Name of Case

Purpose1

Responding to shortening of the settlement period for

Responding to systemgovernment bonds
2

Responding to CLS settlement

Responding to system

3

Renovation of accounting system infrastructure

Development of system infrastructure

In FY2019, we also plan to invest in systems to further improve services, including systems for shorter
settlement periods for securities, etc., the next generation system of JASDEC, and banking integration.

1191. Office and System Infrastructures
Infrastructures Supporting the Best Solution[Administration quality management structure]● Continuous initiatives to improve administration quality
Our Company strives to improve the quality of office operations at all times to provide customers with the best
possible service.
Each department is working to improve the quality by setting, as common tasks in their business plans, the formulationand implementation of quality improvement measures for more robust and efficient administrative operations.
In addition, the Quality Management Office has been established within the Operations Planning Department tolead the organization and analysis of individual issues for more robust and efficient office operations, as well as
the formulation and implementation of solutions.
We take customer requests seriously and respond quickly and appropriately, and also analyze events tocapitalize on our services. In addition, a company-wide operation improvement campaign is promoted based on
set topics every year, and common measures are expanded company-wide.
Specific measures for improving the quality of office work and the status of initiatives are reported to the ProductImprovement Committee on a regular and as-needed basis.

● Utilization of administrative monitoring indicators
Our Company has developed administrative monitoring indicators with the aim of predicting the latent
processing risks arising from various changes in the environment. In July 2016, we began initiatives using datafrom these indicators.
In utilizing administrative monitoring indicators, working hours per staff and office work of each team are measured,and prediction indicators for processing risks are calculated by combining them with various pieces of administrative
data. Indicators have also been created to visualize the workload and proportion of work performed on a monthly
basis. These indicators are used to solve problems in the Products Division responsible for operations.
Administration quality management structure

Board of Directors
Product Improvement
Committee
Operations Planning
Department

Products Division● Execution of business(Execution, settlement, rights, reporting, etc.)

Corporate Division and Business
Promotion Division

Administrative
guidance andoperation support

Quality Management
Office(Initiatives to standardize
operation management
methods)● Digital innovation promotion structure
Our Company is actively involved in the use of new digital technologies, such as robotic process automation(RPA) and artificial intelligence (AI), to improve the quality of office work and increase the resources available forvalue-added work. We began using AI to automate collation and RPA in various operations in March and October
2017, respectively.
In April 2018, the Digital Innovation Office was established in the Operations Planning Department to promote
training of human resources for RPA development, establishment of the RPA operation management system,
technical assistance, and planning of the introduction of new digital technologies.
Each department uses new digital technologies to improve business processes for robust and efficient office work.

120

[Business continuity structure]● Fully prepared for all contingencies
Harumi Triton Square, where the head office is located, and the main system center of our Company are bothquake-resistant and equipped with a power generator that can withstand earthquakes as strong as the Great
Hanshin-Awaji Earthquake (seismic intensity 7). With a dual structure in all of the servers and circuits of thesystems, robust infrastructures ensure business continuity in the event of a disaster or accident.
Furthermore, in the event of a major earthquake, fire, or terrorist attack that would render our head office ormain center inoperable, the backup office and the backup center are established in geographically distantlocations.
We established the backup center in March 2003 for the first time as an asset administration specializing trustbank in Japan, and it meets the safety standards set by the Center for Financial Industry Information Systems(FISC). In addition, real-time disk-to-disk remote copy secures reliable data protection and speedy business
continuity in the event of a disaster.
With expansion of the main center in October 2006, a backup office was established and reflects daily data
updates from the head office. In the event that business continuity at the head office becomes impossible, we haveestablished an operational environment in the backup office to ensure business continuity.
Conceptual Diagram of Backup Center and Backup Office

Data processed at the main
center is transferred to andstored in the backup centerwith a remote copy.

External agencies(clearing houses, etc.)

Main center(disk-to-disk remote copy)

Backup center

Main line
Sub-line
Backup officePrimary and secondary lines
are installed on different routes
to minimize the risk of bothlines becoming unusable at thesame time.

Connection can be switched tothe backup center by the head
office operation.

Head Office

Data in the head office aretransferred and stored to the
backup office on a daily basis.

121

2. Internal Management System
Infrastructures Supporting the Best Solution[Legal compliance management system]● Basic Approach
Our Company regards strict compliance as a fundamental principle of management. As one of Japan's leading
trust banks specializing in asset administration, we shall be constantly aware of our social responsibilities and theimportance of our public mission, and strive to promote a global standard compliance management system.
Through these efforts, we shall aim to gain the high reputation of our clients and the markets, and to establish theconfidence and trust of society at large.

● Thorough supervision of compliance
Based on decisions made by the Board of Directors, our Company has established the Compliance Committee
as a forum for top management to discuss compliance issues directly. The Committee comprehensively manages
and operates compliance at our Company and deliberates on important issues. The Compliance & Legal Affairs
Department, which serves as the secretariat for the Compliance Committee, supervises compliance managementin each department and office, ensures thorough compliance, and checks the status of compliance throughmonitoring of each department and office.
At each department and office, the general managers of each department, etc. is responsible for compliance,and provide guidance and practice on compliance within the department, etc. The General Manager of theCompliance & Legal Affairs Department appoints and dismisses compliance managers directly after determining
their eligibility, and checks compliance within the department, etc.
Compliance Structure

Board of Directors
Compliance Committee
Compliance & Legal Affairs
Department
Compliance Officer
GeneralManager

General managers of
departments AssistantCompany
Departments
and offices

Appointment anddismissal

Reports

Compliance manager
Assistance● Initiatives towards the financial ADR (mediation) system
In order to respond immediately, fairly, and appropriately to complaints from clients, our Company has
concluded a basic agreement for the implementation of procedures with the Japanese Bankers Association andthe Trust Companies Association of Japan, which are Designated Dispute Resolution Organizations under the
Banking Act, and the Trust Business Act and the Act on Engagement in Trust Business Activities by Financial
Institutions, respectively. When customers are not satisfied with our Company's resolution on their complaints, etc.,
the Designated Dispute Resolution Organization shall take measures for resolution from a fair and neutral
standpoint.
Designated Dispute Resolution Organization contracted with our Company
Designated Dispute Resolution Organization under the Banking Act
Designated Dispute Resolution Organization: Japanese Bankers Association
Contact: Consultation Desk, Japanese Bankers Association
Phone: 0570-017109 or 03-5252-3772
Designated Dispute Resolution Organization under the Trust Business Act and the Act
on Engagement in Trust Business Activities by Financial Institutions
Designated Dispute Resolution Organization: Trust Companies Association of Japan
Contact: Trust Counseling Desk
Phone: 0120-817335 or 03-6206-3988

122

[Information management system]● Basic Approach
As the use of information expands significantly accompanying the progress of an advanced information andtelecommunications society, it is a corporate social responsibility to properly protect the information assets held bycompanies. In particular, as a provider of asset administration services, our Company believes that the proper
protection and use of information assets are essential.
In order to appropriately protect and use information assets, our Company strives to strengthen its information
management system by implementing measures for information security and protection of personal information.

● Overview of Information Management System
Our Company has established information management rules, including the "Information Security Policy" and"Information Security Standards," and built an information management system based on these rules. The
Compliance Committee deliberates and coordinates the progress of various measures related to information
management, the management of information security risks, and compliance with relevant laws and regulations. In
addition, the Company has established a Chief Information Officer (officer in charge of the Compliance & Legal
Affairs Department) to oversee the planning, formulation, and promotion of information management in general, as
well as an organization specialized in information management within the Compliance & Legal Affairs Department.
Furthermore, our Company believes that it is extremely important for each and every employee to have a highlevel of awareness of and pay attention to information security in order to ensure the appropriate protection anduse of information assets. To this end, we regularly conduct information management education and training.

Compliance & Legal Affairs
Department
Company Departments andoffices

Relateddepartments

Compliance Committee

Chief Information Officer(Officer in charge of Compliance & Legal Affairs
Department)

Operations Planning
Department

IT & Systems
Planning Department

Information
Management
Supervisor

Information
Manager

Information
Security Manager

1232. Internal Management System
Infrastructures Supporting the Best Solution[Risk management system]● Basic Approach
As financial liberalization and globalization continue to advance, financial operations are rapidly diversifying andbecoming more complex, and financial institutions face a variety of risks.
Under the circumstances, our Company recognizes the realization of a risk management system is part of its
Fiduciary Duty to ensure sound and stable management in winning the trust of customers.
Our Company categorizes the risks pertaining to our businesses by risk factors into Credit Risk, Market Risk,
Liquidity Risk, Operational Risk, etc. and manages them according to the characteristics of each risk under the
Basic Policy for Risk Management established by the Board of Directors for individual risks. In other words, foreach risk category, responsible departments are assigned to plan, formulate and promote risk management. For
important risks, special committees comprised of relevant officers and general managers are established todeliberate and coordinate our Company policies, and identify, analyze, and implement various measures for risks.
Furthermore, in order to ensure and verify the effectiveness of the risk management system, internal audits areenhanced by the Internal Audit Department.

● Comprehensive risk management
Our Company carries out comprehensive risk management according to the Basic Policy for Risk Management.
In addition to risk management of individual risks, risks are identified and assessed as a whole, and appropriate
measures are taken as needed from both qualitative and quantitative aspects to control risks to the extent
tolerated by our business.
The risk management status of individual and integrated risks is reported to the Board of Directors on a regularor as-needed basis.

● Credit, market, and liquidity risk management
Credit, market, and liquidity risk controls are handled by the Risk Management Department, for which the ALM
Committee is established.
Credit risks are managed based on the internal credit rating system, and individual credit limits are set andmanaged at the decision of a reviewing department.
Market risk management sets a limit using interest rate sensitivity, while liquidity risk management sets a ceilingon funding from markets. The ALM Committee determines various risk limits and funding limits.
The Risk Management Department measures and monitors daily the status of compliance with various risk limits
and other limits, and reports regularly to the Board of Directors, etc.

● Operational risk management
Our Company considers operational risks to cover an extensive range of risks, from administrative risk, systemrisk, legal risk, personnel risk, tangible asset risk, regulatory and institutional change risk to reputation risk, andthey are managed by the Risk Management Department through the Operational Risk Management Committee.

124

Risks are managed according to their scale and characteristics as follows.
The Operations Planning Department is responsible for administrative risk management. As fiduciary andcustody services diversify and become more complex, and the number of transactions increases, we are working
to prevent administrative errors by improving the operation management structures and the level of processing
and promoting stricter operation procedures.
The System Risk Management Department is responsible for the management of system risks, ensuring stable
operations of systems through software quality control and the dualization of equipment and facilities. In addition,
based on a long-term strategic vision, we have built a structure for advanced system development with expert
system engineers.
The Compliance & Legal Affairs Department is responsible for legal risk management, and strives to identify any
existence and level of risks incurring tangible and intangible losses due to legal factors such as violation of laws,
regulations and contracts, and take appropriate measures.
The Human Resources Department is responsible for personnel risk management. In accordance with the scaleand nature of personnel risks inherent in each business operation, the Human Resources Department assesses
the status of working hours and acquisition of leave, and builds an appropriate management structure.
The Corporate Planning Department is responsible for the management of tangible asset risk, regulatory andinstitutional change risk, and reputation risk. The Corporate Planning Department identifies, assesses, andmonitors any existence, size, and nature of each risk in a timely and accurate manner, and takes controls,
reduction and other appropriate measures.
In addition, complex risks that cross over the above risks, such as information security risks, compliance risks,
and trust business risks are identified and managed as operational risks.
Conprehensive Risk Management Structure
Risk Category
Department

Committee

Credit risk

Market risk
Risk Management
Department

ALM
Committee

Liquidity risk

Operational risks

Administrative risk

Operations Planning
Department

System risk

System Risk
Management
Department

Legal risk

Compliance & Legal
Affairs Department

Personnel risk

Human Resources
Department

Tangible asset risk
Regulatory andinstitutional change
risk
Reputation risk

Corporate Planning
Department

Operational
Risk
Management
Committee

Content of Risk Category
Risk of our Company incurring losses due to a decline in or complete loss ofasset values (including off-balance sheet items) as a result of a deterioration in
the financial condition of borrowers.
Risk of our Company incurring losses due to a change in values of assets andliabilities held (including off-balance sheet items) as a result of fluctuations ininterest rates, market price of securities, foreign exchange rates, and othervarious market risk factors.
Risk of our Company incurring losses due to the inability of obligors to securesufficient funds to cover financial obligations due to a deterioration in theirfinancial condition, etc. or in cases where obligors are forced to procure funds atinterest rates that are much higher than normal.
Risk of our Company incurring losses arising from inadequate or failed internal
processes, people and systems or from external events.
Risk of our customers and our Company incurring losses, both tangible andintangible, due to confusion in services provided to customers, serious impacts
on the settlement system, etc. caused by illegal, intentional, or negligent
conduct of business by officers and employees or inappropriate operations
arising from the office work systems.
Risk of customers and our Company incurring losses, both tangible andintangible, due to confusion in services provided to customers, serious impacts
on the settlement system, etc. caused by system failures, malfunctioning orother system deficiencies, unauthorized use of computers, etc.
Risk of our Company incurring losses, both tangible and intangible, due to aviolation of laws, regulations and contracts, conclusion of inappropriate
contracts, or other legal causes.
Risk of our Company incurring losses, both tangible and intangible, due to an
outflow or loss of human resources, decline in morale, insufficient humanresource development, inappropriate employment status, workplace and safety
environment, unfair and iniquitous management of personnel, discriminatory
conduct, etc.
Risk of incurring losses due to a deterioration in the quality of the officeenvironment, etc. and damage to tangible assets (movables, real estate,facilities, equipment, etc.) as a result of disasters, crimes, or defects in asset
administration.
Risk of our Company incurring losses, both tangible and intangible, due tochanges in various laws, tax systems, accounting systems, or other regulatory
and institutional changes.
Risk of our Company incurring losses, both tangible and intangible, due todamage to our Company’s credit as a result of various risk events that actuallyoccurred in relation to our Company's business activities, or false rumors,
malicious slander, etc., that are reported or known to markets.

125

2. Internal Management System
Infrastructures Supporting the Best Solution● Emergency response
In preparation for the response in the event of an emergency (situations where business operations become
difficult to continue due to large-scale natural catastrophes, system failures, terrorism, crimes, etc.), the Company
clearly stipulates basic policies, priorities and response measures in the contingency plan, and develops a reliable
structure within the Company aimed at assuring business continuity and a speedy recovery. In addition, various
drills are regularly conducted to prepare for disasters, and effective plans and structures are developed.

[Internal audit management system]● Basic Approach
According to the “Basic Policy for Internal Audit,” Internal Audit Department, independent from the execution line,
objectively and holistically assesses the achievement of main goals for internal management (compliance withlaws, regulations and internal rules, appropriateness of risk management, efficiency and effectiveness of business
operations, reliability of financial reporting, etc.), and provides advice and recommendations for correction to solve
problems.

● Internal audit operation structureInternal audits comprise the Basic Audit, Theme Audit, Special Audit and others. The Basic Audit verifies
compliance with procedures for each division and management of physical items including valuables andimportant items, and information. The Theme Audit verifies the compliance management system, risk
management system and specific audit themes. The Special Audit is conducted for the purpose of clarifying facts
about accidents or violations of internal rules and investigating the causes. These audits are organically combined
to assess the appropriateness and sufficiency of internal management.
Results of internal audits and improvement activities by the auditees are reported to the Board of Directors
through the Internal Audit Committee.

126

Audit Structure

General Meeting of
Shareholders
Board of Corporate
Auditors
Board of Directors

SSAE18 audit
SSAE18 audit

Internal Audit
Committee

Auditing of Auditing
and AssuranceCommittee Practical
Guidance No. 86

External Audit

Reports
President & CEO(Chairperson of Internal
Audit Committee)

Officer inchargeInternal Audit Department

Responsible
Departments

Business Execution DivisionInternal Audits
Basic audit
Theme audit

Compliance & Legal
Affairs Department
Legal compliance
Information management

Corporate Planning
Department

Asset audit (write-offs
and reserves)

Assessment of write-offs
and reserves; Calculationof capital adequacy ratio

Business

Self-assessment

execution by

by each divisioneach division

Risk Management
Department
Self-assessment of assets(secondary)

Audit entrusted to external
audit agencies(Example: System audit)

Operations Planning
Department
Responsible for selfinspection

Self-inspection;
Self-assessment ofassets (primary);
Calculation of
write-offs andreserves[External Audit]● Active use of external audits
In addition to the internal audits, our Company actively utilizes audits by external auditors to ensure sound,appropriate and transparent business operations.
Development and operation of internal controls for our Company’s major operations regarding the fiduciary
assets are audited by an external auditor, and appropriate opinions are obtained for each operation.
● Supplement
Audit of internal controls by the external auditor conforms to SSAE 18 (Statement on Standards for Attestation Engagements No. 18) established by the American
Institute of Certified Public Accountants in the case of U.S. standards, and to Auditing and Assurance Committee Practical Guideline No. 86 "Report on Assurance ofInternal Controls over Entrusted Business" established by the Japanese Institute of Certified Public Accountants in the case of Japanese standards.

127

128

CONTENTS

Financial Data

Overview of Business Performance

Fair Value Information, Etc.

■ FY2018 Business Overview■ Fair Values of Securities and Money in Trust■ Changes in the Key Management■ Fair Values of Derivatives Transactions

Indicators■ Domestic Exchange Transaction Volume■ Foreign Exchange Transaction Volume

Financial Statements■ Balance Sheets

Trust Business Summary■ Statements of Income■ Balance Table of Assets in Trust■ Statements of Changes in Net Assets■ Fiscal Year-end Balance of Trusts with Principal-■ Notes to Accounting Items■ Confirmation Statement fromManagement■ Auditors’ Statement

guaranteed Features■ Fiscal Year-end Balance of Money Trusts, Etc.
■ Balance of Principal of Money Trusts, Etc. by Trust
Period■ Investment in Money Trusts, Etc.

Income Summary■ Balance of Loans by Item Related to Money Trusts■ Gross Profits■ Balance of Loans by Contract Period Related to■ Average Balance of Interest Income andCapital Finance Accounts■ Increase or Decrease in Interest Income
and Expenses

Money Trusts■ Breakdown of Loans by Collateral Related to Money
Trusts■ Balance of Loans by Purpose Related to Money
TrustsBusiness Summary■ Average Balance by Type of Deposit■ Balance of Loans by Industry Related to Money
Trusts■ Average Balance by Loan Item

■ Balance of Loans Related to Money Trusts to SME■ Balance of Loans by Average Life

■ Balance of Securities Pertaining to Money Trusts,■ Breakdown of Loans by Collateral■ Balance of Guarantee of Obligation(Acceptances and Guarantees)

Etc.
■ Loans to Bankrupt Borrowers, Delinquent Loans,
Loans Past Due 3 Months or More, and Restructured■ Balance of Loans by Purpose

Loans pertaining to Loans for Trusts with Principal-■ Balance of Loans by Industry

guaranteed Features■ Balance of Loans to SME■ Balance of Disclosed Claims under the Ordinance for■ Risk-monitored Loans

Enforcement of the Financial Revitalization Act■ Balance of Disclosed Claims under thepertaining to Loans for Trusts with Principal-

Ordinance for Enforcement of theguaranteed Features

Financial Revitalization Act■ Balance of Specific Foreign Claims

Management Indicators■ Write-off of Loans■ Rate of Return■ Breakdown of Allowance for Loan Losses■ Interest Spread■ Average Balance of Securities■ Security-deposit Ratio and Loan-deposit Ratio■ Balance of Securities by Average Life

■ Capital Adequacy Status, Etc.

■ Initiatives to Improve the Management of■ Disclosure Matters concerning Compensation, Etc.

SMEs and Revitalize Local Communities

Consolidated Information* Figures are rounded down to the nearest unit.

129

Overview of Business Performance

FY2018 Business Overview[Financial and economic environments]
The Japanese economy in FY2018 continued to expand moderately on the back of steady improvements in
employment and income environments, despite the impact of a slowdown in overseas economies in exports andproduction as the Bank of Japan continued its extremely accommodative monetary policy.
[Review of Performance and Results]
Our Company has steadily expanded its business under the management policy of "Promotion of 'Smart
Operations' Leveraging IT."In the area of income and expenditures during the fiscal year under review, ordinary income rose ¥1,228 million
year-on-year to ¥25,113 million, due mainly to increases in fiduciary fees and fees and commissions, while interest
income declined impacted by a negative interest rate. Key components included ¥14,746 million of fees andcommissions, and ¥12,431 million of fiduciary fees.
On the other hand, ordinary expenses increased by ¥1,345 million year-on-year to ¥24,372 million, mainly due
to increases in general and administrative expenses and fees and commissions expenses. Key components
included ¥22,239 million of general and administrative expenses, and ¥2,387 million of fees and commissions
expenses.
As a result, ordinary profit was ¥740 million (down ¥116 million year-on-year) and net income was ¥939 million(up ¥431 million year-on-year).
In addition, at the end of the fiscal year under review, the balance of fiduciary assets and assets under custody
based on standing proxy contracts was ¥382 trillion, remaining at the same level as at the end of the previous
fiscal year.

Changes in the Key Management Indicators(¥ million)

FY2014FY2015FY2016FY2017FY2018

Ordinary income

23,78524,50023,462

23,884

25,113

Net business profits

1,825

1,735

1,019

891

778

Ordinary profit

1,792

1,721

990

857

740

Net income

1,129

1,129

674

507

939

Capital stock

50,00050,00050,00050,00050,0001,000,000
shares1,000,000
shares1,000,000
shares1,000,000
shares1,000,000
sharesTotal number of shares issued
Net assets

59,41960,38560,771

61,02459,479Total assets

1,993,528

5,473,232

11,424,703

13,657,253

6,494,669

Balance of deposits (including negotiablecertificate deposits)

589,374

1,058,411

7,699,573

9,875,034

2,274,797

Loans

100,000

210,496

4,508,796

6,209,728

709,241

Securities

337,556

292,596

188,945

263,932

295,307

Net assets per share (yen)59,41960,38560,771

61,02459,479

230

230

135

100

-

Net income per share (yen)1,129.20

1,129.27

674.44507.26939.04

Dividend payout ratio (*1)

20.36%

20.36%

20.01%

19.71%-

Number of employees (*2)

619

646

672

690

697

Non-consolidated capital adequacy ratio(Japanese standard) (*3)

39.68%

22.72%

22.03%

22.67%

37.84%

Fiduciary fees

10,118

10,52011,165

11,425

12,431----

1,745,329

Annual dividends per share (yen)Trust account loans
Trust account securities

91,898,870

88,539,659

84,565,099

81,754,495

85,096,939

Total entrusted assets

145,830,365

141,086,540

146,066,410

143,366,870

143,717,067

(*1)
(*2)
(*3)

130

The dividend payout ratio for FY2018 does not include dividends from the business merger carried out in September 2018.
As the number of employees has been adjusted to include executive officers and fixed-term employees since FY2018,
past data have also been changed.
The “Non-consolidated capital adequacy ratio (Japanese standard)” is calculated according to the “Standards for banks
to judge their capital adequacy in light of assets they held based on Article 14-2 of the Banking Act” (Financial Services
Agency Notification No. 19 of 2006).

Financial Statements

Balance Sheets(¥ million)

AssetsCash and due from banks
Cash
Due from banks
Call loans
Securities
Government bonds
Regional government bonds
Corporate bonds
StocksOther securities
Loans and bills discounted
Loans on deeds
Foreign exchanges
Due from foreign banks (ouraccounts)
Other assets
Prepaid expenses
Accrued income
Initial margins of futures
markets
Derivatives other than fortrading-assets
Other assets
Tangible fixed assets
Buildings
Other tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Deferred tax assets
Total assets
Liabilities and net assets
Deposits
Current deposits
Ordinary deposits
Other deposits
Negotiable certificate deposit
Call money
Due to trust accounts
Other liabilities
Income taxes payable
Accrued expenses
Derivatives other than fortrading-assets
Asset retirement obligations
Other liabilities
Provision for bonus payments
Provision for retirement benefits
Provision for directors’ retirement
benefits
Total liabilities
Capital stock
Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought
forward
Total shareholders’ equity
Valuation difference on availablefor-sale-securities
Total valuation and translation
adjustments
Total net assets
Total liabilities and net assets

FY2016FY2017FY2018(March 31, 2017)(March 31, 2018)(March 31, 2019)

5,976,756
5,059
5,971,697
620,000
188,945
188,499442
44,508,796
4,508,796
2,103

6,639,229
10,062
6,629,167
420,000
263,932
2,601
260,886442
36,209,728
6,209,728
329

5,376,063
10,003
5,366,060
295,307
1,301
47,802245,759442
3709,241
709,241
603

2,103

329

603

110,773
299
3,961

104,143
320
4,898

93,357
421
4,456

125

125

-

-

0

-

106,387872
552
320
16,21913,674
2,545
235
11,424,703

98,798
1,202
728
473
18,38814,0374,350
299
13,657,253

88,480
1,334
888
445
18,52018,183336
240
6,494,669

7,199,573
762,284
6,423,542
13,747500,000
131,900
3,511,928
20,219316
650

9,375,034
1,476,990
7,883,299
14,744500,000
95,5003,598,948
26,380261
810

2,274,797
1,389,718
870,569
14,510759,025
3,373,660
27,346
494
1,030

-

0

-

328
18,92499
140

332
24,975103
188

400
25,421
107
210

69

72

41

11,363,931
50,00010,753321
10,432

13,596,228
50,00011,125348
10,777

6,435,190
50,000
9,443
872
8,571

10,432

10,777

8,571

60,753

61,12559,443

18

 101

35

18

 101

35

60,771
11,424,703

61,024
13,657,253

59,4796,494,669

131

Financial Statements

Statements of Income(¥ million)

FY2016FY2017(from April 1, 2016
to March 31, 2017)

Ordinary income
Fiduciary fees
Interest income
Interest on loans
Interest and dividends on securities
Interest on call loans
Interest on due from banks
Other interest received
Fees and commissions
Fees and commissions on domestic andforeign exchanges
Other fees and commissions income
Other operating income
Foreign currency exchange trading profit
Other ordinary income
Gains on sales of stocks, etc.
Other ordinary income
Ordinary expenses
Interest expenses
Interest on deposits
Interest on negotiable certificate
deposits
Interest on call money
Other interest expenses
Fees and commissions expenses
Fees and commissions on domestic andforeign exchanges
Other fees and commissions expenses
Other operating expenses
Derivatives expenses
Foreign currency exchange trading loss
General and administrative expenses
Other ordinary expenses
Other ordinary expenses
Ordinary profit
Extraordinary profit
Other extraordinary profit
Extraordinary loss
Loss on disposal of fixed assets
Expenses related to business merger
Income before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
Net income

132

FY2018(from April 1, 2017
to March 31, 2018)23,462
11,165
152
65
185
772
499
0
12,442(from April 1, 2018
to March 31, 2019)23,884
11,425
1,869
1,04432
955
93
414,311

25,113
12,431
2,079
639
10
340
1,10617
14,746

106

118

116

12,3366
60
0
22,47232
33

14,1921010
7
1
5
23,027
5
17

14,63014
1424,372
285
2

4

3

0

26
20
1,749

34
7
1,950

292
4
2,387

44

49

48

1,705
1
1
20,682
6
6
990
1
1
988
369
54
314
674

1,900
21,064
18
18
857
109
12
96
747
251
11
240
507

2,339
2
2
22,239
28
28
740
625
625
5
5
1,360
423
1
421
939

Statements of Changes in Net Assets(¥ million)

FY2016 (from April 1, 2016 to March 31, 2017)
Valuation andtranslation adjustments
Retained earnings
Other
Valuation
Total
Total
retained
Total
differencenetvaluation
earnings
shareon
Legal
Total
assetsandholders’availableretained
retained
Retainedtranslation
equityfor-saleearnings
earnings
earnings
adjustments
securities
brought
forward
Shareholders’ equity

Capitalstock

Balance at the beginning of theperiodChanges of items during the period
Dividends from surplus
Net income
Net changes of items other thanshareholders’ equity
Total changes of items during theperiodBalance at the end of the period

50,00050,000275

10,034

10,30960,309

46

 276
674

 230
674

 230
674

76

76 60,385
 230
674

 58

 58

 58

 58

386

46

398

444

444

 58

321

10,432

10,75360,75318

18 60,771(¥ million)

Capitalstock

Balance at the beginning of theperiodChanges of items during the period
Dividends from surplus
Net income
Net changes of items other thanshareholders’ equity
Total changes of items during theperiodBalance at the end of the period

FY2017 (from April 1, 2017 to March 31, 2018)
Valuation andShareholders’ equity
translation adjustments
Retained earnings
Other
Valuation
Total
Total
retained
Total
differencenetvaluation
earnings
shareon
Legal
Total
assetsandholders’ availableretained
retained
Retainedtranslation
equityfor-saleearnings
earnings
earnings
adjustments
securities
brought
forward50,00050,000321

10,432

10,75360,753

27

 162
507

 135
507

 135
507

18

18 60,771
 135
507

 119

 119

 119
252

27

345

372

372

 119

 119

348

10,777

11,125

61,125

 101

 101 61,024(¥ million)

Balance at the beginning of theperiodChanges of items during the period
Dividends from surplus
Net income
Net changes of items other thanshareholders’ equity
Total changes of items during theperiodBalance at the end of the period

FY2018 (from April 1, 2018 to March 31, 2019)
Valuation and translation
Shareholders’ equity
adjustments
Retained earnings
Other
Valuation
Total
Total
retained
Total
differencenetvaluation
Capitalearnings
shareon
Legal
Total
assetsandstock
holders’ availableretained
retained
Retainedtranslation
equityfor-saleearnings
earnings
earnings
adjustments
securities
brought
forward50,000348
10,777
11,125
61,125
 101
 101 61,024

524
939

50,000

3,145939

2,621939

2,621

2,621
136

136

939
136

524

2,206

1,681

1,681

136

136 1,545

872

8,571

9,443

59,44335

35 59,479

133

Financial Statements

Notes to Accounting Items (FY2018)Material accounting policies
1.

2.
3.

4.
5.

6.

Standards for evaluation of securities and valuation methods used
In principle, as with available-for-sale securities, securities are valued by the market value method based on the market price or other appropriate price atthe balance sheet date (with the sales price calculated by the moving average method). However, for securities for which it is generally recognized that thedetermination of fair value is extremely difficult, the original purchase prices are adopted using the moving average method. Note that the full amount ofadjustments in the value of available-for-sale securities is accounted for by adding such amounts directly to net assets.
Valuation standards and methods for derivative transactions
Valuation of derivative transactions shall use the market value method.
Depreciation methods(1) Tangible fixed assets (excluding leases)
Depreciation of tangible fixed assets is calculated by the declining-balance method, with the exception of buildings (excluding equipment installed inbuildings), and facilities attached to buildings and structures acquired on or after April 1, 2016, which are depreciated by the straight-line method.
Estimated useful lives of major items are as follows:
Buildings: 6–50 years
Others: 3–20 years(2) Intangible fixed assets (excluding leases)
Intangible fixed assets are amortized by the straight-line method. Software for internal use is amortized over its estimated useful life (mainly 5 years).
Standards for translating foreign currency assets and liabilities into yen
Foreign currency assets and liabilities are translated into Japanese yen at the exchange rate prevailing at the balance sheet date.
Standards for calculating reserves(1) Provision for bonus payments
To provide for the payment of bonuses, our Company sets aside a reserve for bonuses for employees in the amount of the estimated bonuses
attributable to the fiscal year under review.
(2) Provision for retirement benefits
To provide for the payment of retirement benefits to employees (including executive officers), reserves necessary at the end of the fiscal year underreview are recorded to cover such benefits, based on estimates of the retirement benefit obligations.
(3) Provision for directors’ retirement benefits
To provide for the payment of retirement benefits for directors and corporate auditors, the portion of the total of such benefits that have accrued
through the end of the fiscal year under review is set aside as a reserve.
Accounting for consumption taxes
National and regional consumption taxes are accounted for using the net-of-tax method.

Notes to Accounting Items(Balance Sheets)
1.
2.

3.

4.
5.
6.
7.

The full amount of loans is outstanding to the government of Japan or its affiliated agencies.
Assets pledged as collateral are as follows.
Assets pledged as collateral
Loans and bills discounted¥202,511 million
Debt corresponding to collateralized assets
The above is collateral for overdraft transactions with the Bank of Japan, and there is no outstanding balance of correspondi ng liabilities as of the endof fiscal year under review.
In addition to the above, collateral for exchange settlement and other transactions has been presented in the form of securities amounting to ¥1,301 million.
Other assets include CCP guarantee deposits of ¥27,900 million and deposits of ¥701 million.
Overdraft contracts provide for making loans up to a specified limit, provided there are not violations of the provision of contracts, when loan requests arereceived from customers. The unexercised balance of loan commitments under these contracts is ¥2,331,000 million, and contract terms are 1 year or lessfor the full amount.
Note that, since most of these contracts terminate without requests for overdrafts, the unexercised balance of loan commitments under these contracts will
not necessarily have an effect on the cash flow. Many of these contracts incorporate provisions that allow our Company to reject the loan or reduce themaximum loan amount accepted if financial conditions change, claims need to be protected, or there are any other reasonable grounds. If necessary, realestate, securities and other collateral will be required at the time of contract, and even after the contract is concluded, the business conditions of customers
are periodically monitored based on predetermined internal procedures, and contracts are reviewed and credit protection measures are taken as necessary.
Accumulated depreciation of tangible fixed assets:¥1,691 million
The principal amount of trusts with principal-guaranteed features is ¥508,741 million in money trusts.
Total monetary claims on affiliates:¥70 million
Our Company has accepted limitations on dividends of the surplus as prescribed by Article 18 of the Banking Act.
Notwithstanding the provision of Article 445 (4) (Amounts of Stated Capital and Amounts of Reserves) of the Companies Act, in the case where we pays
dividends from the surplus, it records an amount equivalent to one- fifth of the amount of the deduction from the surplus as a result of the payment of such
dividends of the surplus, as legal retained earnings.
Legal retained earnings related to the dividends from surplus recorded were ¥524 million for the fiscal year under review.

(Statements of Income)
1.

2.
3.

The negative figures for interest on loans, call loans and call money were due to the execution of transactions with a negative interest rate resulting in
negative figures on a net amount basis.
The negative figures for interest and dividends on securities were due to the acquisition cost of securities exceeding a redemption price in total amount. The
negative figure for interest on due from banks is due to the fact that as a consequence of the application of negative interest rates to Bank of Japan current
deposits, interest on deposits with the Bank of Japan became negative on a net amount basis.
Other extraordinary profit was profit/loss on transfer due to the company split executed as of July 1, 2018.
Income related to transactions with affiliates
Total income from trust transactions:¥17 million
Total income from fees and commissions:¥1,302 million
Expenses related to transactions with affiliate
Total expenses related to other businesses and other ordinary transactions: ¥215 million(Statements of Changes in Net Assets)
1.

Types and total number of shares issued(Thousand shares)
Total number outstanding at
the beginning of the period
1,000

2.

Common stock
Dividends(1) Dividends paid during the fiscal year
Date of decision
June 14, 2018 Ordinary General
Meeting of Shareholders
Taken on September 27, 2018 based on
Article 319-1 of the Companies Act

134

Increase during theperiod-Decrease during theperiod-Balance at the end of theperiod1,000

Remarks

Type of shares

Total dividends

Dividends per share

Record date

Effective dateCommon stock¥100 million¥100

March 31, 2018

June 15, 2018

Common stock¥2,521 million¥2,521-

September 28, 2018

(2)Of dividends for which the record date belongs to the fiscal year under review, none applies to those whose effective date is after the last day of the
fiscal year under review.

(Financial Instruments)
1.

Matters related to the status of financial instruments(1) Policy on financial instruments
Dedicated to the asset administration business, our Company, based on the principle of risk controls, owns financial liabilities including liquid deposits
and due to trust accounts, and financial assets including loans to the Japanese government and government agencies and bonds guaranteed by thegovernment on investment.
In financing and investment, we conduct appropriate management according to the risk of each financial instrument, while payi ng attention to various
risk factors.
(2) Types of contents and risks associated with financial instruments
The main financial assets held by our Company are loans to the Government of Japan and relevant Japanese government agencies and securities
such as bonds held for the purpose of the pledge of collateral for settlement. These financial assets are exposed to the risk of a decline in or complete
loss of asset values due to a deterioration in the financial condition of the borrowers or issuers (credit risk) and the risk of a decline in asset values due
to changes in interest rates (market risk).
Financial liabilities are primarily funded by liquid deposits and due to trust accounts. These financing methods entail the risk of incurring losses due tothe inability to secure sufficient funds to cover financial obligations because of a deterioration in our Company’s financial condition or in cases where
funds are procured at interest rates that are much higher than normal (liquidity risk).
As financial liberalization and globalization continue to advance, our Company's financial assets and liabilities are becoming more diverse and complex,
and our Company is exposed to a variety of risks, including credit, market, and liquidity risks.
(3) Risk management relating to financial instruments(i) Risk management initiatives
As a trust bank specializing in asset administration, our Company operates based on risk mitigation.
To increase corporate value while ensuring the soundness and safety of management, our Company is working to improve its risk management
system, recognizing that appropriate management and control of risks according to the nature of its business and risks is one of the top-priority
management issues.
The Board of Directors of our Company has established the Basic Policy for Risk Management, which clearly defines various risks, develops amanagement system and human resources to carry out appropriate risk management, and audits the effectiveness and appropriateness of the
management system. In accordance with this basic policy, our Company is working to strengthen the risk management by utilizing a variety oftechniques to enhance risk controls.
(ii) Integrated risk management
Our Company classifies the risks of various financial assets and liabilities held by our Company under exposure by risk factors such as Credit Risk,
Market Risk, Liquidity Risk, and Operational Risk, and manages them according to the characteristics of each risk.
In addition to risk management of individual risks, there is an integrated risk management system, where risks are identified and assessed as a whole, andappropriate measures are taken as needed from both qualitative and quantitative perspectives to control risks to the extent tolerated by our business.
(iii) Credit risk management
To control losses incurring from actualization of credit risk, our Company implements Credit Management which manages processes from theexecution to collection of credit by transaction type based on an investigation of counterparts’ credit status.
At our Company, the Board of Directors makes important credit risk decisions according to the “Basic Policy for Credit Risk Management.” In addition,
the ALM Committee deliberates and adjusts the basic policy on credit risk, matters concerning the operation of our Company, and credit risk
monitoring. The Risk Management Department, under the supervision of the officer in charge of the Risk Management Department, is responsible forplanning and promoting basic matters related to the credit risk management.
Credit risks are managed based on the internal credit rating system, and individual credit limits are set and managed at the decision of a reviewing
department every six months in principle. Individual credit limits are determined by examining the upper limit of on-balance sheet transactions inaccordance with the credit operation policy. In addition, the Internal Audit Department is established as an internal auditing division independent fromthe operation divisions to strengthen the check-and-balance function.
(iv) Market risk management
At our Company, the Board of Directors makes important market risk decisions according to the “Basic Policy for Market Risk Management.” In
addition, the ALM Committee deliberates and coordinates the basic ALM policies, risk plans, market risk management matters, and emergency
response in the event of a sudden change in the markets.
The officer in charge of the Risk Management Department is responsible for the overall planning and management of market risk controls. The Risk
Management Department is responsible for monitoring, reporting, analysis, recommendation, and setting various limits on market risks, and carries
out planning and promotion related to market risk management. The Risk Management Department is responsible for assessing our Company’s risk
situation and it provides daily report to the President and regular reports to the Board of Directors, etc.
Various limits are set to control market risks. Although our Company does not engage in any trading activities, the banking operations set position
limits using a warning point against losses, interest rate sensitivity, etc.
Regarding the market operations, the middle office (Risk Management Department) has been established independent from the front office (market
division) and the back office (administrative management division), creating a structure based on mutual checks and balances. According to theactual transaction, the middle office manages BPV (base point value) and other risk indicators, and offers meticulous risk management assuming atime of stress.
(v) Market risk situation
Our Company has also established the “Basic Policy for Market Risk Management,” which stipulates that operations are limited to mainly customertransactions, and aims for safe and reliable management accordingly.
In our Company, the interest rate risk, which is a major market risk, affects mainly government guaranteed bonds and other financial instruments. At
our Company, the Risk Management Department calculates BPV for these financial instruments on a daily basis and monitors compliance with apredetermined upper limit. As of March 31, 2019, BPV for financial instruments held by our Company was ¥45 million.
(vi) Liquidity risk controls on financing
Our Company's liquidity risk management structure is basically the same as that of the market risk management structure "(iv) Market risk management."
In addition, our Treasury Department carries out practical operations of assessing and adjusting the status of cash flow management, as well as planningand promotion of cash flow management. Updates on cash flow situations are reported to the ALM Committee and the President.
In measuring liquidity risk, upper limits on financing from the market and other cash flow-related indicators are used. Limits, etc. on liquidity risk are
discussed and adjusted by the ALM Committee. Furthermore, we have established the categories, "times of normality," "time of concern" and "time ofcrisis," depending on cash flow conditions and the response measures in "time of concern" and "time of crisis." In addition, there is a structure inplace capable of promptly responding in the "time of emergency" that affects our Company's cash flow.
(4) Supplementary explanation of fair value of financial instruments
The fair value of financial instruments is based on the market price of such instruments, but, when market prices are not available, prices based onreasonable estimates are reported. Since these estimates involve certain assumptions, in cases where assumptions are subject to change, the value of
assets may also change.

2.

Fair values of financial instruments
The differences between the carrying amounts on the balance sheets and fair values, as of March 31, 2019, are shown below. Unlisted stocks and others
where it is extremely difficult to obtain the fair value are not included (refer to Note 2).
(¥ million)(1) Cash and due from banks(2)Securities
Available-for-sale-securities(3) Loans and bills discounted
Total assets(1) Deposits(2) Call money(3) Due to trust accounts
Total liabilities

Balance sheet amount
5,376,063

Fair value
5,376,063

Difference-

294,862
709,241
6,380,166
2,274,797
759,025
3,373,660
6,407,483

294,862
709,241
6,380,166
2,274,797
759,025
3,373,660
6,407,483-

135

Financial Statements(Note 1) Calculation of the fair value of financial instruments
Assets(1) Cash and due from banks
Regarding due from banks without maturity, since the fair value closely approximates the book value, the book value is recorded as the fair value.
Regarding due from banks with maturity, as the deposit period is short (one year or less), and the fair value approximates the book value, the book value isrecorded as the fair value.
(2) Securities
Bonds shall be the price of the exchange. Notes on securities for each holding purpose are included in "(Securities)."(3) Loans and bills discounted
Since the execution period is short (1 year or less), loans and bills discounted are made to the Japanese government or the Japanese government
agencies, and the fair value approximates to the book value, the book value is recorded as the fair value.
Liabilities(1) Deposits
Since all are demand deposits, the payment amount in the event of a demand at the end of the period (book value) is deemed as the fair value.
(2) Call money
Since the execution period is short (1 year or less), and the fair value approximates to the book value, the book value is recorded as the fair value.
(3) Due to trust accounts
Since the amount equals the demand deposits, the payment amount in the event of a demand at the end of the period (book value ) is deemed as the fairvalue.
(Note 2) The balance sheet amounts of financial instruments where it is recognized as being extremely difficult to determine their respective fair values are as
follows, and they are not included in “Assets, (2) Available-for-sale-securities” in the fair value information of financial instruments.
(¥ million)
Category
Balance sheet amountUnlisted stocks
442
Unlisted foreign securities
3
Total
445
* Because of the absence of market value quotes for these securities, their fair value is difficult to determine, and their fair value is not disclosed.
(Note 3) Redemption schedule of monetary claims and securities with maturity dates after the closing day(¥ million)
One year or lessOver two years Over three years Over five years
to three years or to five years or to seven years or
less
less
less
-

Over sevenyears to ten
years or less-Due from banks
5,366,060
Securities
Available-for-sale-securities
121,161
137,823
34,934
with maturities
Loans and bills discounted
709,228
Total
6,196,450
137,823
34,934(Note 4) Repayment schedule of deposits and other interest-bearing debt after the date of account settlement (¥ million)
One year or less Over two years Over three years Over five years
Over sevento three years or to five years or to seven years or
years to ten
less
less
less
years or less
Deposits
2,274,797
Call money
795,025
Due to trust accounts
3,373,660
Total
6,407,483* Demand deposits and due to trust accounts equivalent to demand deposits are included in the “1 year or less” category.

Over tenyears
Over ten
years-(Securities)
Negotiable certificate of deposits in “Due from banks” are included in addition to "Government bonds," "Local government bonds," and "Corporate bonds.”
Available-for-sale-securities (as of March 31, 2019)
Type of company
Balance sheet amount
Acquisition cost (¥1
Difference (¥1 million)(¥1 million)
million)
Bonds
Those with theRegionalbalance sheet
42,641
42,62119
government bonds
amount exceeding
the acquisition
Corporate bonds
153,459
153,417
41
cost
Subtotal
196,100
196,039
60
Bonds
Government bonds
1,301
1,301
0
Those with a
Regionalbalance sheet
5,160
5,161
0
government bonds
amount not
Corporate bonds
exceeding the
92,29992,3099acquisition cost
Others59,00059,000Subtotal
157,762
157,772
 10
Total
353,862
353,81250(Tax Effect Accounting Items)
The breakdown of factors accounting for the accrual of deferred tax assets and liabilities is as follows.
Deferred tax assets
Asset retirement obligations¥122 million
Provision for retirement benefits and provision for directors’ retirement benefits
77
Accrued business tax and accrued business office tax
71
Provision for bonus payments
32
Others:41
Total deferred tax assets
346
Deferred tax liabilities
Tangible fixed assets
89
Valuation difference on available for sale securities
15
Total deferred tax liabilities
105
Net deferred tax assets¥240 million

136

(Transactions with Related Parties)
1.

Parent company and major corporate shareholders(¥ million)
Relationship withType of transactions
Transaction
Accounting Balance at end
related party
amount (Note 2)
itemof period
Other
The Dai-ichi Life
Entrustment of
Entrustment of securities
Owned
AccruedaffiliatedInsurance
securities accounting accounting office work,
1,206
285
Directly 16%
incomecompany
Company, Limited
office work, etc.
etc. (Note 1)
As the Dai-ichi Life Insurance Company, Limited ceased to fall under the category of a related party during the fiscal year under review, the transaction
amount during the period when it fell under the category of a related party is shown, and the ratio of voting rights owned and the balance at the end of theperiod are the ratio and balance as of the end of the same period.
Terms of transactions and the decision policies, etc.
Note 1: Commission for entrustment of securities accounting office work, etc. is determined based on the commission rate specified by our Company.
Note 2: The transaction amount does not include consumption tax. The balance at the end of the period includes consumption tax, etc.
Subsidiaries and affiliates, etc.
None
Other companies with indirect capital affiliation(¥ million)
Type of company Name of company
Percentage
Relationship withType of transactions
Transaction
Accounting Balance at end
ownership
related party
amount (Note 4)
itemof period
Subsidiary of the Mizuho Trust &None
Trusted with re-trusts, etc. Trusted with re-trusts,
5,621
Suspense
7,265
parent company
Banking Co., Ltd.
Concurrent appointment
etc. (Note 1)
receiptof officers
Company split (Note 2)
625
Subsidiary of the Mizuho Trust
None
Outsourcing of system
Outsourcing of systemparent company
Systems Company,
operation and software
operation
1,924
Limiteddevelopment
Outsourcing ofsoftware development
6,935(Note 3)
Type of company

2.
3.

4.

Name of company

Percentage
ownership

As Mizuho Trust & Banking Co., Ltd. and Mizuho Trust Systems Company, Limited, ceased to fall under the category of a related party during the fiscal year
under review, the transaction amount during the period when it fell under the category of a related party is shown, and the balance at the end of the period isthe balance as of the end of the same period.
Terms of transactions and the decision policies, etc.
Note 1: Fiduciary fees, etc. for re-trusts and other trusts are negotiated and determined based on consideration calculated by Our Company.
Note 2: Considerations for the company split are determined based on a reasonable amount agreed upon with the parties. Regarding the company split,
refer to 2. Business Divestitures in [Business combination and divestitures].
Note 3: Prices, etc. for the entrusted system operation and software development are negotiated and determined based on the consideration calculatedby Mizuho Trust Systems Company, Limited
Note 4: The transaction amount does not include consumption tax. The balance at the end of the period includes consumption tax, etc.
Directors and other individual shareholders
None(Per share information)
Net assets per share:
Net income per share:¥59,479.00¥939.04(Business combination and divestitures)
1.

2.

Business Combinations
Our Company and Japan Trustee Services Bank, Ltd. (hereinafter, "JTSB") merged on October 1, 2018 through a joint share transfer. Overview of Business
Combinations(1) Names of companies engaged in business combination and the contents of business
JTSB: Trust banking
Our Company: Trust banking(2) Main purpose of business combination
The purpose of the business combination was to contribute to the further development of the domestic securities settlement ma rket and theenhancement of a Japanese investment chain. This can be done by combining the management resources and know-how of our Company and
JTSB in asset administration operations, achieving stable and high-quality operations, and strengthening system development capabilities throughpursuing the economies of scale.
(3) Date of business combination
October 1, 2018(4) Legal form of business combination
Establishment of a holding company through joint share transfer(5) Name of company after business combination
JTC Holdings, Ltd.
Business Divestitures
On July 1, 2018, in anticipation of the aforementioned business merger with JTSB, our Company and Mizuho Trust & Banking Co., Ltd. made a business
transfer through a corporate split.
(1) Overview of Business Divestitures(i) Name of company after business divestiture
Mizuho Trust & Banking Co., Ltd.
(ii) Contents of split business
Trust service business (excluding those pertaining to re-trusts from other companies and defined contribution pensions)Custody service business (excluding foreign bank agency business )Securities lending service business (excluding those related to trust service business)
Collateral management service business for over-the-counter derivatives transactions(iii) Main reasons for business divestiture
Businesses were transferred by the company split for the purpose of consolidating solution functions for the asset administration in <Mizuho> toMizuho Trust & Banking Co., Ltd.
(iv) Date of business divestiture
July 1, 2018(v) Matters related to an overview of other transactions including legal forms
Absorption-type company split in which the considerations received are limited to cash or other assets(2) Overview of accounting processing implemented(i) Amount of gain or loss on transfer¥625 million(ii) Appropriate book value of the assets and liabilities pertaining to the transferred business and the major breakdown thereof
There were no assets or liabilities transferred in this case.
(iii) Accounting processing
As no assets or liabilities were transferred as a result of the company split, the full amount received as consideration was recognized as transfer
gain or loss and recorded as extraordinary profit.
(3) Estimated profit or loss pertaining to the divested business recorded in the statements of income for the fiscal year under review
Ordinary income¥620 million
Ordinary profit ¥12 million

137

Financial Statements | Income Summary

Confirmation Statement from Management
I have confirmed that the financial statements (balance sheets, statements of income,and statements of changes in net assets) for the 19th term, covering the period from April
1, 2018 to March 31, 2019, are presented appropriately and that the internal auditing
related to the preparation of these financial statements functioned effectively.
July 11, 2019
Trust & Custody Services Bank, Ltd.

Nobumitsu Watanabe,
President & CEO

Auditors’ Statement
The Company has been audited by independent accounting firm KPMG AZSA LLC in
accordance with Paragraph 1, Article 396 of the Companies Act, and received the Audit
Report indicating that all material items pertaining to assets and income have beenpresented appropriately in the documents prepared pursuant to the provisions ofParagraph 1, Article 20 of the Banking Act.

Gross Profits(¥ million)

FY2016
Domestic
Business
Division

GlobalBusiness
Division

Total

Domestic
Business
Division

FY2018GlobalBusiness
Division

Total

Domestic
Business
Division

GlobalBusiness
Division

Total

Fiduciary fees

11,165-

11,165

11,425-

11,425

12,431-

12,431

Net interest income

 184

0

 184

 1,8662

 1,864

 1,80915

 1,793

(-)

(0)

(-)

( 0)

 152

 1,8744

 1,869

 2,096

17

( 0)

(̶)

( 0)

(-)

Interest income
Interest expenses

(-)

(0)

 153

0

(0)

(-)

 2,079

31

1

32

7

2

5

 287

1

 285

Net fees and commissions

11,584

 892

10,692

13,488

 1,127

12,36014,020 1,661

12,359Fees and commissions

12,296146

12,442

14,151

159

14,311

14,67670

14,746

Fees and commissions
expenses

711

1,038

1,749

663

1,286

1,950

655

1,731

2,387

Other net operating income

1

6

5

-

10

10

-

2

2

Other operating income

-

6

6

-

10

10

-

-

-

Other operating
expenses

1

-

1

-

-

-

-

2

2

Gross profits

22,564

 885

21,67823,046

 1,114

21,932

24,642

 1,648

22,993Gross margin ratio

0.30%  12.50%

0.29%

0.17% 15.65%

0.16%

0.25% 25.60%

0.24%

Notes:

138

FY2017

1. Domestic operations are denominated in Japanese yen, and global operations are denominated in foreign
currencies. However, yen-denominated non-resident transactions are included in global operations.
2. The upper figures of "Interest income" and "Interest expenses" refer to interest on loans between theDomestic Business Division and the Global Business Division.
3. Gross margin ratio = Gross profits / Average balance of investment management account × 100

Average Balance of Interest Income and Capital Finance Accounts(¥ million)

FY2016
Average
Balance

FY2017

Interest

Average
BalanceYield

FY2018Interest

Yield

Average
Balance

Interest

(-)

(-)

Yield

<Domestic Business Division>
Investment management account

(-)

(-)

(-)

(-)

7,377,623

 153

0.00% 13,376,988

1,874

0.01%

9,521,693 2,096

0.02%

1,451,829

 65

0.00%

6,251,509

1,044

0.01%

3,695,423

 639

0.01%

Securities

220,827

185

0.08%

234,91232

0.01%

297,950

 10

0.00%

Call loans

3,207,187

 772

0.02%

3,950,665

 955

0.02%

1,262,178

 340

0.02%

Due from banks

2,497,778

499

0.02%

2,939,901

93

0.00%

4,266,140 1,106

0.02%

Capital finance accounts(6,948)(0)(6,964)( 0)

7,506,861

31

0.00% 13,500,565

7

3,570,902

33

0.00%

9,258,007

17

Negotiable certificate deposit

500,000

4

0.00%

750,684

Call money

254,648

 26

0.01%

Borrowings

-

-

-

(6,948)

(0)

7,083

0

0.01%

4

-

Call loans
Due from banks-

Capital finance accounts

Loans and bills discounted(6,252)( 0)

0.00%

9,607,617

 287

0.00%

0.00%

4,275,514

2

0.00%

3

0.00%

165,753

00.00%

150,957

 34

0.02%

1,807,762

 292

0.01%

-

-

-

-

-

-

(6,964)( 0)(6,252)

( 0)

7,114

4

0.06%

6,436

17

0.27%

-

4

-

-

3

-

-

-

-

-

-

-

-

-

-

(-)
988

(-)
1

0.11%

(-)
917

(-)
2

0.24%

(-)
164

(-)
1

1.08%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Investment management account7,377,758

 152

 0.00% 13,377,138

 1,869

 0.01%

9,521,877 2,079

 0.02%Loans and bills discounted

1,451,829

 65

 0.00%6,251,509

 1,044 0.01%

3,695,423

639

 0.01%

Securities

220,831

185

0.08%

234,91732

0.01%

297,953

 10

 0.00%Call loans

3,207,187

 772

0.02%

3,950,665

 955

0.02%

1,262,178

 340

 0.02%

Due from banks

2,497,778

499

0.02%

2,939,901

93

0.00%

4,266,140 1,106

 0.02%

Capital finance accounts

7,500,900

32

0.00% 13,494,518

5

0.00%

9,601,528

 285

 0.00%3,570,902
500,000

33
4

0.00%
0.00%

9,258,007
750,684

17
3

0.00%
0.00%

4,275,514
165,753

2
0

0.00%
0.00%

Call money

254,648

 26

0.01%

150,957

 34

0.02%

1,807,762

 292

 0.01%

Borrowings

-

-

-

-

-

-

-

-

-

Deposits<Global Business Division>
Investment management accountLoans and bills discounted
Securities

Deposits
Negotiable certificate deposit
Call money
Borrowings<Total>Deposits
Negotiable certificate deposit

Notes:

1: The investment management account is after deducting the average balance of noninterest due frombanks (¥16 million in FY2016, ¥18 million in FY2017, and ¥16 million in FY2018).
2. The figure inside the bracket shows the average balance and interest on loans between the Domestic
Business Division and the Global Business Division.

139

Income Summary

Increase or Decrease in Interest Income and Expenses(¥ million)

FY2016FY2017Net Increase
increaseoror decrease
decrease by balance

FY2018

Increaseordecreaseby balance

Increaseordecreaseby rate ofinterest

Increaseordecreaseby rate ofinterest

Net Increase
increaseoror decrease
decrease by balance

Increaseordecreaseby rate ofinterestNet
increaseordecrease

 103

 2,297 2,400

 840

 880

 1,720

 62

 54

 116

 802

 176

 979

 2,197

1,974

 222

426

 20

Securities

 107

 27

 134

1

 155

 153

405

2

 40

 42

Call loans

 646

 409

 1,055

 179

3

 183

646

 31

614

205

 1,300

 1,094

14

 419

 405

343

 856

 1,200

Interest expenses

21

 1,044 1,023

3

 35

 39

196

 476

 279

Deposits

32

0

32

10

 26

 15

5

9

 14

Negotiable certificate
deposit

5

 379

 384

1

2

1

1

1

3

Call money

186

 758

 572

 40

32

8

264

7

 257

Borrowings

-

-

-

-

-

-

-

-

-

0

5

5

0

3

3

0

13

12

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

<Domestic Business Division>
Interest income
Loans and bills discounted

Due from banks<Global Business Division>
Interest income
Loans and bills discounted
Securities
Call loans

-

-

-

-

-

-

-

-

-

Interest expenses

Due from banks

0

0

0

0

1

1

1

1

0

Deposits

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

 102

 2,299

 2,402

 838

 878

 1,717

 1,886

1,677

 209

 62

 54

 116

 802

 176

 979

426

 20

405

Securities

 107

 27

 134

1

 155

 153

2

 40

 42

Call loans

 646

 409

 1,055

 179

3

 183

646

 31

614

205

 1,300

 1,094

14

 419

 405

343

 856

 1,200

Interest expenses

21

 1,040

 1,019

2

 35

 37

195

 474

 279

Deposits

32

0

32

10

 26

 15

5

9

 14

Negotiable certificate
deposit

5

 379

 384

1

2

1

1

1

3

Call money

186

 758

 572

 40

32

8

264

7

 257

Borrowings

-

-

-

-

-

-

-

-

-

Negotiable certificate
depositCall money
Borrowings<Total>Interest income
Loans and bills discounted

Due from banks

Note:

140

Parts where the increase/decrease factor overlap between the balance and interest rate are prorated according to theirrespective proportion of change.

Business Summary

Average Balance by Type of Deposit(¥ million)

FY2016FY2017FY20183,570,902

9,258,0074,275,514

3,526,281

9,209,262

4,227,437---

Other deposits

44,62048,74448,077

Negotiable certificate
deposit

500,000

750,684

165,753<Domestic Business Division>
Deposits
Liquid deposit
Time and savings deposit<Global Business Division>
Deposits---

Liquid deposit

-

-

-

Time and savings deposit

-

-

-

Other deposits

-

-

-

Negotiable certificate
deposit---

3,570,902

9,258,0074,275,514

3,526,281

9,209,262

4,227,437---

Other deposits

44,62048,74448,077

Negotiable certificate
deposit

500,000

750,684

165,753<Total>Deposits
Liquid deposit
Time and savings deposit

Notes:

1. Liquid deposits = Current deposits + Ordinary deposits + Saving deposits + Deposits at notice
2. Time and savings deposit = Time deposit

Average Balance by Loan Item(¥ million)

FY2016FY2017FY2018<Domestic Business Division>
Loan of bill

-

-

-

1,450,059

6,233,391

3,678,143

1,770

18,117

17,279---1,451,829

6,251,509

3,695,423

Loan of bill

-

-

-

Loans on deeds

-

-

-

Overdraft---

Discounted bill

-

-

-

Total

-

-

-

Loans on deeds
Overdraft
Discounted bill
Total
<Global Business Division><Total>Loan of bill
Loans on deeds
Overdraft
Discounted bill
Total

-

-

-

1,450,059

6,233,391

3,678,143

1,770

18,117

17,279---1,451,829

6,251,509

3,695,423

141

Business Summary

Balance of Loans by Average Life(¥ million)

FY2016
1 year or less

FY2017FY2018709,241

4,508,796

6,209,728

Floating interest rate

-

-

-

Fixed interest rate

4,508,796

6,209,728

709,241
709,241

Total

4,508,796

6,209,728

Floating interest rate

-

-

-

Fixed interest rate

4,508,796

6,209,728

709,241

FY2017FY2018

Breakdown of Loans by Collateral(¥ million)

FY2016
Securities

-

-

-

Claims---Commodities

-

-

-

Real estate

-

-

-

Guarantees

37,500197,699

110,000

4,471,296

6,012,029

599,240

4,508,796

6,209,728

709,241

FY2017FY2018Credits
Total

Balance of Guarantee of Obligation (Acceptances and Guarantees)
None

Balance of Loans by Purpose(¥ million)

FY2016
Capital fundWorking capital
Total

-

-

-

4,508,796

6,209,728

709,241

4,508,796

6,209,728

709,241

Balance of Loans by Industry(¥ million, %)FY2016
BalanceFinancial and Insurance

FY2017

Composition
ratio

FY2018

BalanceCompositi
on ratio

BalanceCompositi
on ratio

37,5000.83

197,699

3.18

110,000

15.51

Various services--

140,6122.26

74,000

10.43

Government, etc.

4,471,296

99.17

5,871,417

94.55

525,240

74.06

4,508,796

100.006,209,728

100.00709,241100.00Total

Balance of Loans to SME
None

Risk-monitored Loans (Status of Loans to Bankrupt Borrowers, Delinquent Loans, Loans
Past Due 3 Months or More, and Restructured Loans)
None

142

Balance of Disclosed Claims under the Ordinance for Enforcement of the Financial
Revitalization Act(¥ million)

Ordinary loans
Total

FY2016FY2017FY20184,508,799

6,209,728

709,241

4,508,799

6,209,728

709,241

Note: None applies to bankrupt and substantially bankrupt claims, doubtful claims, and substandard claims.

Balance of Specific Foreign Claims
None

Write-off of Loans
None

Breakdown of Allowance for Loan Losses
None

Average Balance of Securities(¥ million)

FY2016FY2017FY2018<Domestic Business Division>
Government bonds
Regional government bonds

2,431

548

1,365

-

-

30,596

Short-term bonds

-

-

-

Corporate bonds

217,954

233,921265,546

442

442

442

-

-

-

220,827

234,912297,950Government bonds

-

-

-

Regional government bonds

-

-

-

Short-term bonds

-

-

-

Corporate bonds

-

-

-

Stocks---Other securities

4

4

3

Foreign stocks

4

4

3

Foreign bonds

-

-

-

4

4

3

2,431

548

1,365

-

-

30,596

StocksOther securities
Total<Global Business Division>

Total<Total>Government bonds
Regional government bonds
Short-term bonds

-

-

-

Corporate bonds

217,954

233,921265,546

442

442

442

4

4

3

Foreign stocks

4

4

3

Foreign bonds

-

-

-

220,831234,917297,953

StocksOther securities

Total

143

Business Summary

Balance of Securities by Average Life(¥ million)

FY2016FY2017FY2018Government bonds
1 year or less

-

2,601

1,301

Over one year to three years or less

-

-

-

Over three years to five years or less

-

-

-

Over five years to seven years or less

-

-

-

Over seven years to ten years or less

-

-

-

Over ten years

-

-

-

Total

-

2,601

1,301

1 year or less

-

-

3,573

Over one year to three years or less--

12,138Over three years to five years or less--

32,089Over five years to seven years or less

-

-

-

Over seven years to ten years or less

-

-

-

Total

4

4

47,802---

Regional government bonds

Short-term bonds
Total
Corporate bonds
1 year or less

160,41150,969116,449

Over one year to three years or less

28,087

209,917

126,234

Over three years to five years or less

-

-

3,075

Over five years to seven years or less

-

-

-

Over seven years to ten years or less

-

-

-

188,499

260,886

245,759

Those with no prescribed period

442

442

442

Total

442

442

442

Those with no prescribed period

4

3

3

Total

4

3

3

Those with no prescribed period

4

3

3

Total

4

3

3

-

-

-

Total
StocksOther securities

Foreign stocks

Foreign bonds
Total

Initiatives to Improve the Management of SMEs and Revitalize Local Communities
As a trust bank specializing in asset administration, we provide clients with services
dedicated to asset administration based on the Corporate Strategy to "Transform asset
administration operations into strategic products and comprehensive asset administration
services." Due to our operational characteristics, we currently do not provide loans forbusiness funds to companies, including small and medium-sized enterprise customers, orfor customers who wish to use housing loans. For this reason, there are no direct activities
taken to improve the business of SMEs and revitalize local communities.

144

Fair Value Information, Etc.

Fair Values of Securities and Money in Trust
Securities
Negotiable certificate of deposits in “due from banks” is included in addition to "government
bonds," "corporate bonds," "stocks,” and "other securities" in the balance sheet.
1. Available-for-sale-securities(¥ million)

FY2016Type

FY2017

Balance sheet Acquisition
amountcost

FY2018Difference

Balance sheet
amountAcquisition
cost

Difference

Balance sheet
amountAcquisition
cost

Difference

Bonds
Those with thebalance sheet
amountexceeding theacquisition cost

Regional
government
bonds

-

-

-

-

-

-

42,641

42,621

19

Corporatebonds

88,811 88,772

39

-

-

-

153,459 153,417

41

88,811 88,772

39

-

-

-

196,100 196,039

60

Government
bonds

-

-

-

2,601

2,601

0

Regional
government
bonds

-

-

-

-

-

Corporatebonds

99,687 99,699

 12

115,00115,000
0
214,687
303,499

Subtotal
Bonds

Those with abalance sheet
amount notexceeding theacquisition cost

OthersSubtotal
Total

1,301

1,301

0

-

5,160

5,161

0

260,886 261,031

 145

92,29992,3099-100,000 100,000-

59,00059,000-214,699 12363,487 363,633

 145

157,762 157,772

 10

303,472

26363,487 363,633

 145

353,862 353,81250

Note: Amounts in the balance sheet are calculated using fair values as of the end of each fiscal year.

2. Available-for-sale-securities sold during the fiscal year under review(¥ million)

FY2017FY2018

Sale amount

Total gains on
sale

Total amount ofloss on sale

Sale amount

Total gains on
sale

Total amount ofloss on sale

Stocks

3

1

-

-

-

-

Total

3

1

-

-

-

-

Money in trust

None

Valuation difference on available-for-sale securities(¥ million)

FY2016FY2017

26

 145

50

26

 145

50

Deferred tax assets ( indicates deferred tax liabilities)

8

44

 15

Valuation difference on available-for-sale securities

18

 101

35

Valuation difference
Available-for-sale-securities

FY2018145

Fair Value Information, Etc.

Fair Values of Derivatives Transactions
Derivative transactions for which hedge accounting is not applied
Regarding unhedged derivatives transactions, the amount of contract as of the closing
date for each type of transaction item, or the amount of principal equivalent fair value andvaluation gain or loss stipulated in the contract, and the calculation method for thecorresponding fair value shall be as follows. Contract amount, etc. do not per se indicate
the market risk of derivatives transactions.
1. Interest-related Transactions

None

2. Currency-related Transactions(¥ million)

Category

FY2016
Type

Contract
amount,etc.

FY2017

Contract
amount,etc.
exceeding
one year

Fair
value

Valuationof gain or
loss

Contract
amount,etc.

Contract
amount,etc.
exceeding
one year

FY2018Fair Valuation
value of gain or
loss

Contract
amount,etc.

Contract
amount,etc.
exceeding
one year

Fair
value

Valuationof gain or
loss

OTC

Exchange
contract
Order to
sell

-

-

-

-

184

-

0

0

-

-

-

-

Order to
buy

-

-

-

-

184

-

0

0

-

-

-

-

Total

-

/

-

-

369

/

-

-

-

/

-

-

Notes: 1. Fair market valuation is conducted on the above transactions and a valuation of gain/loss is recorded in
the statements of income.
2. Fair value is calculated according to the forward exchange rates.

3. Transactionstransactions

related toNonestocks,bonds,

trading

and

other

derivatives

Domestic Exchange Transaction Volume(¥ million)

FY2016FY2017FY201842,592,458

48,210,818

42,967,809

-

-

-

36,641,900

43,148,123

39,071,430

-

-

-

79,234,358

91,358,941

82,039,239

FY2016FY2017

Exchange sold

-

-

-

Exchange bought

-

-

-

1,349

1,125

1

-

-

-

1,349

1,125

1

Outward exchange
Remittance and transfer
Collection
Inward exchange
Remittance and transfer
Collection
Total

Foreign Exchange Transaction Volume(¥ million)

FY2018Outward exchange

Inward exchange
Exchange payment
Exchange for collection
Total

146

Trust Business Summary

Balance Table of Assets in Trust(¥ million)

FY2016FY2017FY2018(March 31, 2017)(March 31, 2018)(March 31, 2019)(Assets)
Loans and bills discounted--

1,745,329

84,565,099

81,754,495

85,096,939

Government bonds

48,258,088

46,100,668

48,665,326

Regional government bonds

4,308,712

3,993,902

3,961,698

Short-term bonds

280,761

294,498

249,498

Corporate bonds

9,778,612

9,085,079

9,016,140

Stocks

10,520,801

10,427,681

10,420,289

Foreign securities

9,766,281

10,057,148

10,723,901

Other securities

1,651,843

1,795,516

2,060,085

Foreign securities in investment
trusts6,473,780

6,592,794

6,539,111

Interests in trusts

18,697,165

18,335,132

20,215,738

Trust securities

5,728,389

5,766,986

2,348,434

Monetary claims

731,203765,826

6,707,694

Life insurance claims

395,664

419,689444,220

Other monetary claims

335,538

346,137

6,263,473

Other claims

12,957,572

10,390,343

3,481,862

Call loans

663,774

851,857

6,875,014

Loans to banking account3,511,928

3,598,948

3,373,660

Cash and due from banks

12,737,497

15,310,485

7,333,282

Due from banks

12,737,497

15,310,485

7,333,282

146,066,410

143,366,870

143,717,067

Securities

Total assets(Liabilities)
Designated money trusts
Corporate investment fundMonetary trusts other than moneyin trust

165

102

7,179,851

65,557,646

61,517,057

51,234,267

316,855

592,615541,748

Trust of securities

10,242,335

9,813,003

3,599,339

Composite trusts

69,949,406

71,444,091

81,161,859

146,066,410

143,366,870

143,717,067

Total liabilities

Fiscal Year-end Balance of Trusts with Principal-guaranteed Features (including trusts that have been
re-trusted for the investment of trust assets)

Money trusts(¥ million)

FY2016FY2017FY2018Others654,342

639,533

508,741

Total net assets

654,342

639,533

508,741654,342

639,533

508,741000654,342

639,533

508,741(Assets)(Liabilities)
Principal
OthersTotal liabilities

147

Trust Business Summary

Fiscal Year-end Balance of Money Trusts, Etc.
(¥ million)

Money trusts

FY2016FY2017FY201865,557,811

61,517,160

58,414,119

FY2017FY2018

Balance of Principal of Money Trusts, Etc. by Trust Period(¥ million)

FY2016
Money trusts
Less than 1 year
1 year or more to less than 2 years

-

-

-

57,161,478

53,807,714

50,373,000

2 years or more to less than 5 years
5 or more years
Others
Total

-

-

-

627,873

768,610984,034

654,342

639,533

508,741

58,443,694

55,215,857

51,865,775

FY2016FY2017FY2018Investment in Money Trusts, Etc.
(¥ million)

Money trusts
Loans and bills discounted
Securities--

1,745,329

49,239,432

45,345,655

42,731,802

FY2017FY2018

Balance of Loans by Item Related to Money Trusts(¥ million)

FY2016
Loan of bill

-

-

-

Loans on deeds--

1,745,329

Discounted bill

-

-

-

-

-

1,745,329

Total

Balance of Loans by Contract Period Related to Money Trusts(¥ million)

FY2016FY2017FY2018

1 year or less--

1,745,329

Total

-

-

1,745,329

Breakdown of Loans by Collateral Related to Money Trusts(¥ million)

FY2016FY2018

Securities

-

-

-

Claims---Commodities

-

-

-

Real estate

-

-

-

Guarantees--

128,253

Credits--

1,617,075--

1,745,329

Total

148

FY2017

Balance of Loans by Purpose Related to Money Trusts(¥ million)

FY2016FY2017FY2018

Capital fund

-

-

-

Working capital--

1,745,329--

1,745,329

Total

Balance of Loans by Industry Related to Money Trusts(¥ million, %)FY2016FY2017FY2018

BalanceComposition
ratio

BalanceFinancial and Insurance

-

-

-

-

105,853

6.06

Government, etc.

-

-

-

-

1,639,475

93.94

-

-

-

-

1,745,329

100.00Total

Composition Balance
ratio

Composition
ratio

Balance of Loans Related to Money Trusts to SME(¥ million)

FY2016FY2017FY2018

Balance of total loans (A)--1,745,329

Balance of loans to SME (B)--22,400(B) / (A) × 100
1.28%
Note: Small and medium-sized enterprises shall refer to companies with capital of ¥300 million or less (provided,
however, that it shall refer to ¥100 million in wholesaling; ¥50 million in retailing, restaurants, goods leasing,etc.), or companies and individuals with 300 or fewer regular employees (provided, however, that it shallrefer to 100 in wholesaling, goods leasing, etc. and 50 in retailing and restaurants).

Balance of Securities Pertaining to Money Trusts, Etc.
(¥ million)

FY2016FY2017FY2018Government bonds

39,298,786

36,950,696

35,323,269

Regional government bonds

2,383,388

2,060,795

1,924,158

Corporate bonds

5,698,299

4,941,010

4,818,232

Stocks873,091959,205

229,694

Other securities

985,865433,948

436,446

49,239,432

45,345,655

42,731,802

Total

Loans to Bankrupt Borrowers, Delinquent Loans, Loans Past Due 3 Months or More, andRestructured Loans pertaining to Loans for Trusts with Principal-guaranteed Features
None

Balance of Disclosed Claims under the Ordinance for Enforcement of the Financial
Revitalization Act pertaining to Loans for Trusts with Principal-guaranteed Features
None

149

Management Indicators

Rate of Return(%)

FY2016FY2017FY2018

Ordinary profit to total assets

0.01

0.00

0.00

Ordinary profit to capital

1.90

1.62

1.42

Return on Assets

0.00

0.00

0.00

Return on Equity
1.29
0.96
1.80
Notes: 1. Ordinary profit to total assets (current net) = Ordinary profit (current net) / Average balance for total assets(excluding customers’ liabilities for acceptances and guarantees) × 100
2. Ordinary profit to capital (current net) = Ordinary profit (current net) / Shareholders’ equity and averagebalance of valuation and translation adjustments × 100

Interest Spread(%)

FY2016

Yield on investment
Yield on financial arrangements
Gross interest spread

FY2017

Domestic
Business
Division

GlobalBusiness
DivisionTotal

 0.000.01

 0.00 0.01

0.00

0.11

0.00

 0.00 0.00 0.10 0.00 0.01FY2018Domestic
GlobalBusiness Business
Division Division

Total

Domestic
GlobalBusiness Business
Division Division

Total

0.06

 0.01

 0.020.27

 0.020.24

 0.00 0.001.08

 0.00 0.18

 0.01

 0.01

 0.81

 0.01

Security-deposit Ratio and Loan-deposit Ratio(%)

FY2016FY2017

Domestic
Business
Division

GlobalBusiness
Division

Total

Fiscal year-end

2.45

-

2.45

2.67

Average during the period

5.42

-

5.42

2.34

58.55

-

58.55

Average during the period
35.66
35.66
Note: Deposits include negotiable certificate deposits.

FY2018Domestic
GlobalBusiness Business
Division Division

Total

Domestic
GlobalBusiness Business
Division Division

Total

-

2.67

12.98

-

12.98

-

2.34

6.70

-

6.70

62.88

-

62.88

31.17

-

31.17

62.46

-

62.46

83.20

-

83.20

Security-deposit ratio

Loan-deposit ratio
Fiscal year-end

Capital Adequacy Status, Etc.
This section is intended to disclose matters that are specified separately by the Commissioner of the Financial Services
Agency regarding the status of capital adequacy, etc. (Financial Services Agency Notification No. 7 of 2014), in accordance with
Paragraph 1 (5) (d), Article 19-2 of the Ordinance for Enforcement of the Banking Act (Ordinance of the Ministry of Finance No.
10 of 1982).

● Composition of Capital Disclosure
Non-consolidated capital adequacy ratio summary table (Japanese standard)(¥ million)

FY2017FY2018Amounts
excludedundertransitionalarrangements

Amounts
excluded undertransitionalarrangementsCore Capital: Instruments and reserves (1)Directly issued qualifying common shares or preferred shares
mandatorily convertible into common shares capital plus related
capital surplus and retained earnings

61,02559,443

Of which, capital and capital surplus

50,00050,000Of which, retained earnings

11,1259,443

Of which, treasury stock (-)
Of which, planned distribution of income (-)
Of which, other than above
Subscription rights to acquire common shares or preferredshares mandatorily convertible into common shares

150

100

-

-

-

-

-

(¥ million)

FY2017FY2018Amounts
excludedundertransitionalarrangements

Reserves included in Core Capital: Instruments and reserves
Of which, general reserve for possible loan losses
Of which, eligible provisions
Eligible non-cumulative perpetual preferred shares subject totransitional arrangements included in Core Capital
Eligible capital instruments subject to transitional arrangements
included in Core Capital
Capital instruments issued through the measures for strengthening
capital by public institutions included in Core Capital
Amount equivalent to 45% of land revaluation excess subject totransitional arrangements included in Core CapitalCore Capital: Instruments and(A)
reserves
Core Capital: Regulatory adjustments (2)Total intangible fixed assets (excluding those relating to mortgage
servicing rights)
Of which, goodwill (including those equivalent)
Of which, other than goodwill and mortgage servicing rights
Deferred tax assets (excluding those arising from temporary
differences)
Shortfall of eligible provisions to expected losses
Capital increase due to securitization transactions
Gains and losses due to changes in own credit risk on fair valued
liabilities
Prepaid pension costs
Investments in own shares (excluding those reported in the Net
Assets)Reciprocal cross-holdings in capital instruments issued by otherfinancial institutions for raising capital that are held by the Bank
Investments in the capital of banking, financial and insurance entities
that are outside the scope of regulatory consolidation
Amount exceeding the 10% threshold on specified items
Of which, significant investments in the common stock of otherfinancial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences
Amount exceeding the 15% threshold on specified items
Of which, significant investments in the common stock of otherfinancial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences

Amounts
excluded undertransitionalarrangements

-

-

-

-

-

-

-

-

-

-

61,02559,443

14,7103,677

18,52014,7103,677

18,520

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Core Capital: Regulatory adjustments (B)Capital14,71018,520Total amount of capital ((C)=(A)–(B))
Risk-Weighted Assets (3)Credit risk assets
Of which, total of items included in risk-weighted assets subject totransitional arrangements
Of which, intangible fixed assets (excluding goodwill andmortgage servicing rights)
Of which, deferred tax assets
Of which, prepaid pension costs
Of which, exposure to other financial institutions
Of which, other than above
Amount equivalent to market risk divided by 8%
Amount equivalent to operational risk divided by 8%
Credit risk-weighted assets adjustments
Amount equivalent to operational risk adjustments
Total risk-weighted assets (D)Capital Adequacy Ratio

46,31540,923

176,959

62,7693,677-

Capital Adequacy Ratio (C)/(D)3,677
27,338204,298

45,372
108,14222.67%

37.84%

151

Management Indicators● Capital
Capital Funding Instruments
Our Company's capital funding instrument is common stocks.

Assessment Method of Capital Adequacy
In order to maintain sufficient capital to match the risks faced by our Company, we have developed
an appropriate and effective capital management system, and periodically assess our capital
adequacy as follows.
[Maintaining an appropriate BIS capital adequacy ratio]
In addition to ensuring a minimum capital adequacy ratio (Japanese standard: 4%), capital
adequacy is assessed and confirmed qualitatively and quantitatively to maintain financial soundness
considering the various business environments.
Specifically, as of the end of FY2018, we hold capital of over ¥40.9 billion, compared with therequired capital of ¥4.32 billion under the Basel Capital Accord (Japanese standard). (For details of
the required capital amount, please refer to the next section, "Non-consolidated Required Capital by
Portfolio Category.")

Non-consolidated Required Capital by Portfolio Category(¥100 million)

FY2017
Credit risk
Standardized Approach
For sovereign

FY2018

70.7

25.1

61.8

17.5

-

-

For financial institutions and others

50.4

10.8

For corporate and others

1.4

1.3

Mortgage loan--

Securitization

-

-

10.0

5.3

Others:8.8

7.5

Operational risk

For CCP (central counterparty clearing)

10.9

18.1

Total amount of non-consolidated capital

81.7

43.2

Operational risk equivalents are calculated using the Advanced Measurement Approach in FY2017 and the Basic
Indicator Approach in FY2018. (Standardized Measurement Approach is not used.)● Credit Risk
Credit Risk Management
Overview of credit risk management policies and procedures
Credit risks are managed based on the internal credit rating system, and individual companies’
credit limits are set and managed according to the decision of a reviewing department every half
term in principle. Individual credit limits are set by examining credit limits for on-balance sheettransactions in accordance with the ALM Policy and others.
Self-assessment of assets is part of credit risk management to understand the reality of assets as
preparation for appropriate write-offs and reserves based on corporate accounting principles, etc.
Specifically, assets are assessed and managed based on the implementation structures establishedfor each asset, such as loans and securities.
In principle, write-offs and reserves are appropriately implemented by the predetermined
standards for write-offs and reserves based on the borrower and classification categories defined asa result of self-assessment. An allowance for loan losses is recorded based on the expected loss
ratio calculated from a probability of bankruptcy for a certain period, but there is no outstandingbalance as of the end of FY2018.
Our Company uses the Standardized Approach for calculating the amount of credit risk assets
under the Basel Capital Accord.

152

Status of portfolios to which the Standardized Approach is applied
Under the Standardized Approach, qualified rating agencies used to assess risk-weights are
Rating and Investment Information, Inc. (R&I) for Japanese obligors or securities issuers, andStandard and Poor's (S&P) for overseas obligors or securities issuers. In addition, 100% risk weightis applied to all corporate exposures.

Credit Risk Exposure Status
Note: For off-balance sheet exposures, credit equivalents are shown. Exposures are not included when it is notnecessary to calculate the amount for credit risk assets.
There was no significant difference between the year-end balance of credit risk exposures and the averagerisk position during the fiscal year for both the previous fiscal year and fiscal year under review.

Breakdown by region
FY2017(¥100 million)

Off-balance sheet amount otherthan loans, commitments andderivatives

Securities

Derivatives

Others

Total

Domestic

69,2682,639-

70,704

142,611

Overseas

-

0

-

4

4

69,2682,639-

70,708142,616

Off-balance sheet amount otherthan loans, commitments andderivatives

Securities

Derivatives

Others:

Total

Domestic

9,117

2,952

-

53,83765,907

Overseas

-

0

-

6

6

9,117

2,952

-

53,84465,914

Securities Derivatives

Others

Total

Total

Total

FY2018(¥100 million)

Breakdown by trading partner
Off-balance sheet amountother than loans,
commitments andderivatives
65,884For sovereign
For financial institutions
and others
For corporate andothersOthersTotal

For financial institutions
and others
For corporate andothersOthersTotal(¥100 million)

26-

64,656

130,567

-

440

-

5,861

6,301

-

-

-

35

35

3,383

2,172

-

156

5,712

69,2682,639-

70,708142,616

Securities Derivatives

OthersTotal

Off-balance sheet amountother than loans,
commitments andderivatives
7,277

For sovereign

FY2017FY2018(¥100 million)

490-

52,78860,557

-

454

-

901

1,355

-

-

-

34

34

1,840

2,007

-

120

3,967

9,117

2,952

-

53,84465,914

Securities Derivatives

Others

Total

Breakdown by period
Off-balance sheet amount otherthan loans, commitments andderivatives
One year or lessOver one year
OthersTotal(¥100 million)

69,268-535-

70,543140,347

2,099

-

-

2,099

-

4

-

164

169

69,2682,639-

70,708142,616

Securities Derivatives

OthersTotal

Off-balance sheet amount otherthan loans, commitments andderivatives
One year or less

FY2017FY2018(¥100 million)

9,117

1,213

-

53,71164,041

Over one year

-

1,734

-

-

1,734

Others

-

4

-

133

138

9,117

2,952

-

53,84465,914

Total

Overdue Exposure Status

None

Write-off of Allowance for Loan Losses and Loans None

153

Management Indicators

Exposure to which the Standardized Approach is Applied
Breakdown by risk-weight category (after applying credit risk mitigation effects)
0%
10%
20%
35%
50%
100%
150%
350%

FY2017Off-balance sheet
7,170
0
7,170

(¥100 million)

On-balance sheet
127,127
1,921
6,301
94
135,445

0%
10%
20%
35%
50%
100%
150%
350%

FY2018Off-balance sheet
2,025
2,025

(¥100 million)

On-balance sheet
61,378
1,096
1,355
58
63,889(Risk weight)

Total(Risk weight)

Total

Total
134,297
1,921
6,301
94
142,616

Total
63,403
1,096
1,355
58
65,914

Amounts of Capital Deduction and Exposure Applied 1,250% Risk Weight
None● Credit Risk Mitigation Techniques
Risk Management by Credit Risk Mitigation Techniques
Our Company acquires collateral and guarantees as a means of protecting the receivables. This
specifically applies to collateralized call transactions (financing, etc. pledge of collateral for callmoney).
In calculating credit risk assets under the Basel Capital Accord, the effects of credit risk mitigation
through eligible collateral and guarantees are reflected in accordance with the Notification.

Breakdown of Exposures to which Credit Risk Mitigation Techniques are Applied
FY2017
Financial asset
collateralStandardized Approach
For sovereign
For financial institutions and others
For corporate and others
Mortgage loan
Securitization
Others
Total-

Guarantees(¥100 million)

Credit derivatives

3,630
3,630

-

FY2018Financial asset
collateralStandardized Approach
For sovereign
For financial institutions and others
For corporate and others
Mortgage loan
Securitization
Others
Total

154

-

Guarantees
2,746
2,746

Total
3,630
3,630

(¥100 million)

Credit derivatives
-

Total
2,746
2,746

● Counterparty
Transactions

Risk

in

Derivative

andLong-term

Settlement

Risk Management of Counterparties to Derivative Transactions
Details of derivatives transactions
Our Company principally carries out forward foreign exchange transactions.

Risks related to derivatives transactions, etc.
Risks related to counterparties to derivatives transactions include the following.
• Credit risk
Risk of our Company incurring losses due to a decline in or complete loss of asset values(including off-balance assets) as a result of the deterioration in the financial condition ofborrowers.
• Other risks
Risk of incurring costs due to the provision of additional collateral in the event that our
Company's rating is downgraded

Risk management system related to derivatives transactions, etc.
Risks related to counterparties to derivatives are managed in the same way as for other credits.

Derivative Transaction Status There was no transaction applicable at the end of theperiod.

● Operational Risk
Operational Risk Management
1. Basic Approach
Our Company defines operational risk as "Risk of our Company incurring losses arising frominadequate or failed internal processes, people and systems or from external events."
Recognizing that operational risks cover an extensive range of risks, from administrative risk,
system risk, legal risk, personnel risk, tangible asset risk, regulatory and institutional change risk to
reputation risk, our Company has established the Basic Policy for Risk Management pertaining tomanagement structures and methods of each risk to ensure they are assessed and controlled
properly.

2. Operational Risk Management System
At our Company, the Board of Directors makes important operational risk decisions. The
Operational Risk Management Committee monitors the overall operational risk situation anddeliberates on individual important matters.
In addition to management by departments responsible for each operational risk, our Company
conducts Control Self-assessment* as part of our cross-sectional management. Through theimplementation of Control Self-assessment, we work to develop and strengthen the management
approach and systems for appropriately identifying, assessing, measuring, monitoring and controllingvarious operational risks arising from the sophistication and diversification of financial operations andthe rapid progress in information technologies, etc.
*Control Self-assessment
An autonomous risk management approach that formulates and implements necessary risk
mitigation measures, after identifying risks inherent in business operations, and assessing andidentifying risks that remain even after actions are taken.

3. Calculation of Operational Risk Equivalents(1) Calculation method
Our Company calculates operational risk equivalents using the "Advanced Measurement
Approach" for FY2017 and "Basic Indicator Approach" for FY2018.

155

Management Indicators(2) Overview of Advanced Measurement Approach implemented in FY2017
With the development of a measurement model that considers all four elements (internal loss
data, external loss data, scenario analysis, business environment/internal control factors), in
addition to internal loss data that are operational risk events our Company has experienced in
the past, scenario data are used to capture future unexperienced operational risk events that
may occur. Values measured by the statistical approach (holding period 1 year, one-tailed
confidence interval: 99.9%) are defined as the amount of operational risk equivalents.
In the measurement of operational risk equivalents for FY2017, expected loss is not deducted
and risk reduction through insurance is not performed. Boundary events with credit risk shall not
be measured as the operational risk.

● Securitization Exposures

None● Market Risk
Our Company does not include market risk equivalents in the calculation of its capital adequacy
ratio.

● Risk of Equity Exposures
Risk Management of Equity Exposures
Risk management for equity exposures is managed within the system of credit risk management
related to defaults, etc. Our Company does not hold listed stocks and others with fair value. Unlisted
stocks where it is extremely difficult to determine their fair value in accounting are valued at either
cost or amortized cost by using the moving-average method.

Equity Exposure Status
Balance sheet amount

Listed equity exposures
Equity exposures other than above
Total

FY2017
Balance sheet
Fair value
amount44-FY2018(¥100 million)

Balance sheet amount

Fair value

44-Gain/loss on sale of equity exposures
FY2017FY2018Gain/loss on
saleSale of equity exposures

0Gain onsale
0

Loss onsale--

There is no applicable gain or loss by write-offs and valuation related to equity exposures.

156(¥100 million)

Gain/loss on
saleGain onsale-

Loss on sale-

● Interest Rate Risk
Overview of Risk Management Policies and ProceduresInterest rate risk in the banking book (IRRBB) shall refer to the risk of losses incurred when theeconomic value of assets and liabilities (including off-balance sheet items) fluctuates due tofluctuations in market interest rates.
Our Company measures interest rate risk for all interest-sensitive assets and liabilities (including
off-balance sheet items).
Our Company has established the "Basic Policy for Market Risk Management" for appropriate
control of market risks to ensure soundness and safety of management. Specifically, we haveestablished a warning point for valuation of gains/losses, interest rate sensitivity (basis point value orBPV*) and other limits every half term to ensure that risk quantity and loss amount are kept within acertain range. Daily reports on the compliance with various limits are made to the management, andreports on the status of market risks are regularly made to the ALM Committee and the Board of
Directors based on market environment analysis.
Our Company measures IRRBB on a monthly basis and reports the measurement results to the
President.
* BPV is an approach to measure how much the present value of assets and liabilities changes asinterest rates change by 1 bp (0.01%).

Overview of Interest Rate Risk Calculation Methods
Calculation method of ⊿EVE
⊿EVE is measured as the amount of decline in economic value due to interest rate shocks, basedon the disclosure notification.
Regarding liquid deposits, core deposits are not considered, and thus it is deemed there will be nointerest revision interval. None applies to early cancellation of time deposits, early redemption of
fixed-rate loans and handling of multiple foreign currencies.
The ratio of ⊿EVE to the core capital at our Company was well below the regulatory level of 20%
at which we recognize there is no issue in the interest rate risk management.

Other interest rate risk measurement
Please refer to "Overview of Risk Management Policies and Procedures.”

IRRBB1: Interest rate risk(¥ million)

Item
No.
1
2
3
4
5
6
7

⊿EVE
Parallrl up
Parallel down
Steepener
Flattener
Short rate up
Short rate down
Maximum

8Core capital

FY20185,082
 5,082
5,082
FY201840,923157

Management Indicators | Consolidated Information

Disclosure Matters concerning Compensation, Etc.
This section shall relate to compensation, etc. based on the provisions of Article 19-2, Paragraph 1, Item 6, etc. of theOrdinance for Enforcement of the Banking Act (Ordinance of the Ministry of Finance No. 10 of 1982), and disclose the casespecified separately by the Commissioner of the Financial Services Agency as a matter that may have a material impact on thestatus of business operations or assets of banks, etc. (Financial Services Agency Notification No. 21 of 2012).
1. Matters related to the development of organizational structure for compensation, etc. ofApplicable Officers and Employees of our Company(1) Scope of "Applicable Officers and Employees"
The following shall describe the scope of "Applicable Officers" and "Applicable Employees,etc." (collectively referred to as " Applicable Officers and Employees") set forth in thecompensation notification to be disclosed.
(i) Scope of "Applicable Officers"
Applicable officers include our Company directors and corporate auditors, excluding
external directors and corporate auditors.
(ii) Scope of "Applicable Employees, etc."
Of officers and employees who are not Applicable Officers, our Company shall subject"Persons receiving a high amount of compensation, etc." having a material impact on thebusiness management or financial condition of our Company and the major consolidated
subsidiaries to disclosure as “Applicable Employees, etc.” A description of our Company's
consolidated subsidiaries is omitted as there is no such subsidiary.
There are no “Applicable Employees, etc.” among officers and employees other than“Applicable Officers” in our Company.
(A) Scope of "Persons receiving a high amount of compensation, etc.""Persons receiving a high amount of compensation, etc." shall refer to those who receive
compensation, etc. exceeding the standard amount from our Company. Our Group (theholding company, which is a parent company and its major consolidated subsidiaries) has abasis amount of ¥21 million.
With regard to lump-sum retirement benefits, the amount obtained by first deducting the fullamount of a lump-sum retirement benefit from the compensation, etc., then adding back the"amount obtained by dividing the lump-sum retirement benefit by the number of service years"
is deemed to be the amount of compensation, etc. for the person, to determine "Persons
receiving a high amount of compensation, etc."(B) Scope of "Person having a material impact on the business operations or financial condition of
our Company"
A "Person having a material impact on the business operations or financial condition of ourCompany" shall refer to those whose transactions and management matters regularly
conducted have a considerable impact on the operation of our Company's business or whosetransactions, etc. could cause loss with a significant impact on the financial condition of ourCompany.
(2) Determination of compensation, etc. for Applicable Officers and Employees(i) Determination of compensation, etc. for Applicable Officers
At our Company, the General Meeting of Shareholders determines the total amount ofcompensation (the maximum amount) for directors and corporate auditors. The Board of
Directors is wholly trusted with the allocation of compensation to individual directors resolvedby the General Meeting of Shareholders. Allocation of compensation to individual corporate
auditors is wholly determined by consultation among corporate auditors.
2. Pertinence Evaluation of System Design and Operation of Compensation, etc. for Applicable
Officers and Employees of our Company(1) Policies concerning compensation, etc.
(i) Policies concerning compensation, etc. for Applicable Officers
At our Company, the General Meeting of Shareholders determines the maximum total
amount of compensation for directors and corporate auditors. Directors’ compensation is
resolved by the Board of Directors, and Corporate Auditors’ compensation is determined byconsultation among Corporate Auditors within the limit of the total amount of compensation
resolved by the General Meeting of Shareholders.
3. Consistency between our Company's Compensation System for Applicable Officers andEmployees and Risk Management, and Linkage between Compensation, etc. and Performance
There is a mechanism in place when determining compensation, etc. for Applicable Officers,
where the total amount of compensation for all officers is resolved by the General Meeting of
Shareholders. There is a mechanism of taking budget measures in place when determining

158

compensation, etc. considering our Company's financial condition and other factors.
4. Types, Total Amount and Payment Method of Compensation, etc. for Applicable Officers andEmployees of our Company
Total amount of compensation, etc. for Applicable Officers and Employees of our Company (from
April 1, 2018 to March 31, 2019)(¥ million)

Category

Total amount
Headcountof
Total amountBasiccompensation,of fixed
compensationetc.
compensation

Stock
optionOthersRetirement
Total amountof variable Bonuses benefitscompensation

Applicable
Officers(Excluding
9
144
120
117
—
2
—
—
24
external
officers)
Notes: 1. Amount of compensation, etc. for Applicable Officers includes compensation, etc. for Our Group officers.
2. Retirement benefits describe the amount of "Retirement benefits for directors" and "Provision for directors’
retirement benefits" that accrued in the corresponding fiscal year.

5. Other reference matters related to the system on compensation, etc. for the Applicable Officers
and Employees of our Company
There is no particular matter applicable other than those listed in the preceding paragraphs.

Consolidated Information As our Company has no subsidiaries, consolidated accounting is not implemented.

159

Disclosure index

Article 19-2, Ordinance for Enforcement of the Banking Act
1. Overall Business and Organization
 Management organization ---------------------------------------------- 97
 List of major shareholders ---------------------------------------------- 96
 Management ---------------------------------------------------------------- 97
 Name of independent auditors --------------------------------------- 138
 List of offices ---------------------------------------------------------------- 96
 Matters concerning bank agent -------------------------------------None

2. Key Business ---------------------------------------- 102~116
3. Matters concerning Key Business Business overview in the latest business year ------------------- 130
 Indicators showing the status of key business in the last 5
business years• Ordinary income --------------------------------------------------------- 130• Ordinary profit or loss -------------------------------------------------- 130• Net income or loss ------------------------------------------------------ 130• Capital and total number of shares issued ----------------------- 130• Net assets ----------------------------------------------------------------- 130• Total assets --------------------------------------------------------------- 130• Deposits ------------------------------------------------------------------- 130• Loans ----------------------------------------------------------------------- 130• Securities ------------------------------------------------------------------ 130• Non-consolidated capital adequacy ratio ------------------------- 130• Dividend payout ratio -------------------------------------------------- 130• Number of employees ------------------------------------------------- 130• Fiduciary fees ------------------------------------------------------------ 130• Trust account loans----------------------------------------------------- 130• Trust account securities ----------------------------------------------- 130• Total entrusted assets ------------------------------------------------- 130
 Indicators showing the status of business in the last 2 business
years(1) Indicators showing the status of key business• Gross profits and gross margin ratio --------------------------- 138• Net interest income, net fees and commissions, net trading
income, other net operating income --------------------------- 138• Average balance, interest, yield and net interest margin ofinvestment management accounts and capital financeaccounts -------------------------------------------------------- 139, 150• Increase or decrease in interest income and expenses -- 140• Ordinary profit to total assets and ordinary profit to capital ---------------------------------------------------------------------------- 150• Return on assets and return on equity ------------------------ 150(2) Indicators for deposits• Average balance by deposit item ------------------------------- 141• Balance of time deposits by average life -------------------None(3) Indicators for loans, etc.
• Average balance by loan item ----------------------------------- 141• Balance of loans by average life -------------------------------- 142• Balance of loans by type of collateral and customers’
liabilities for acceptances and guarantees ------------------ 142• Balance of loans by purpose ------------------------------------- 142• Balance of loans by industry and the proportion in total
amount of loans ----------------------------------------------------- 142• Balance of loans to SME and the proportion in total amount ofloans ------------------------------------------------------------------- 142• Balance of specific foreign claims by country, which accountfor 5% or more of the total --------------------------------------- 143• Fiscal year-end and -average of loan-deposit ratio -------- 150(4) Indicators for securities• Average balance of trading account securities by type - None
• Balance of securities by type and average life --------------- 144• Average balance of securities by type ------------------------- 143• Fiscal year-end and -average of security-deposit ratio ---- 150(5) Indicators for trust business• Balance table of assets in trust ----------------------------------- 147• Acceptance of money trusts, etc. -------------------------------- 148• Balance by type of trusts with principal-guaranteed features--------------------------------------------------------------------------- 147• Balance of principal of money trusts and loan trusts by trust
period -------------------------------------------------------------------- 148• Loan by type of money trusts, etc. and investment balance by
security category ----------------------------------------------------- 148• Balance by loan item related to money trusts ---------------- 148• Balance of loans pertaining to money trusts, etc. by contract
period ------------------------------------------------------------------- 148• Balance of loans pertaining to money trusts, etc. by type ofcollateral ---------------------------------------------------------------- 148• Balance of loans pertaining to money trusts, etc. by purpose--------------------------------------------------------------------------- 149• Balance of loans pertaining to money trusts, etc. by industry
and the proportion in total amount of loans ------------------- 149• Balance of loans pertaining to money trusts, etc. for SME andthe proportion in total amount of loans ------------------------- 149• Balance of securities pertaining to money trusts, etc. by type--------------------------------------------------------------------------- 149

4. Matters concerning Management of Banking Operations
 Risk management system ----------------------------------------124~127
 Legal compliance management system ---------------------------- 122
 Initiatives to improve the management of SMEs and revitalize
local communities ---------------------------------------------------------- 144
 Name of designated dispute resolution organization ------------ 122

5. Matters concerning Status of Assets in Last 2 BusinessYears Balance sheets, statements of income, and statements ofchanges in net assets -----------------------------------------------131~133
 Balance of risk-monitored loans ------------------------------------- None Balance of risk-monitored loans for trusts with principalguaranteed features ----------------------------------------------------- None Capital adequacy status -------------------------------------------150, 151
 Fair value information on securities, money in trust, andderivatives transactions---------------------------------------------145, 146
 Allowance for loan losses at fiscal year-end and theincrease/decrease during fiscal year ------------------------------- None Amount of write-off of loans ------------------------------------------ None
 Audit results by independent auditors ------------------------------- 138
 Audit results based on the Financial Instruments and Exchange
Act ---------------------------------------------------------------------------- None
 Audit results for calculation of capital adequacy ratio --------- None

6. Disclosure of Compensation, etc. ----------------------- 158

Financial Services Agency Notification No. 7
of 2014
1. Capital Adequacy Status, etc. --------------------------- 150

Article 6 of the Ordinance for Enforcement of the
Act on Emergency Measures for the Revitalizationof the Financial Functions
1. Asset Assessment Status--------------------------------- 143

160

JTC Holdings, Ltd.
DISCLOSURE 2019
The document is a disclosure material prepared in accordance with Articles 21 and 52-29 of
the Banking Act.

Published

July 2019
Corporate Planning Department, JTC Holdings, Ltd.
8-11, Harumi 1-chome, Chuo-ku, Tokyo, 104-6115
TEL 03-6220-2625
Website: https://www.jtc-hd.jp/

161

JTC Holdings
JTC Holdings, Ltd.
Japan Trustee Services Bank, Ltd.

162

Trust & Custody Services Bank